Preamble

The House met at Half past Two o'Clock

PRAYERS

[Mr. SPEAKER in the Chair]

Oral Answers to Questions — SERETSE KHAMA (JUDICIAL INQUIRY)

Mr. Platts-Mills: asked the Secretary of State for Commonwealth Relations when the judicial inquiry into the case of Seretse Khama is expected to complete its investigations and publish its findings.

The Under-Secretary of State for Commonwealth Relations (Mr. Gordon-Walker): I am afraid it is impossible to give any definite date for the conclusion of the judicial inquiry. It is, however, expected that it will complete its work about the middle or end of December. The report will then have to be considered by the High Commissioner and the Secretary of State, and I cannot at present say when it will be published.

Mr. Platts-Mills: Can the Under-Secretary give the House a solemn assurance that the action of the Government will be in no wise prejudiced by the fact that Seretse married a white woman, and will he convey that assurance to the Government of South Africa, who look with greedy and race ridden eyes on this problem?

Mr. Gordon-Walker: I think there is no need for such an assurance; it is obviously so. The Government of South Africa do not come into this matter at all.

Oral Answers to Questions — MENTAL HOSPITAL PATIENT, MELBOURNE

Mr. Hardy: asked the Secretary of State for Commonwealth Relations when the hon. Member for Salford, South, is likely to receive the information for which he has asked regarding the detention of Joseph Price, of Salford, in a Melbourne

mental hospital; and the circumstances of his detention.

Mr. Gordon-Walker: The United Kingdom High Commissioner in Australia has been asked to make inquiries, and to furnish information as soon as possible. There has not yet been time for his reply to be received.

Mr. Hardy: As it is about a month since this man was placed in this mental home, can my hon. Friend speed up the inquiry? The man's wife and parents are very anxious about this matter.

Mr. Gordon-Walker: I appreciate the anxiety of this gentleman's relations. We made inquiries directly we heard of the case, and if we do not hear anything soon I am ready to ask our High Commissioner to speed up the inquiries he is making.

Mr. Hardy: Will my hon. Friend ask for the information by cable?

Mr. Gordon-Walker: That has already been done.

Oral Answers to Questions — SOUTH AFRICA (HIGH COMMISSION TERRITORIES)

Mr. Parker: asked the Secretary of State for Commonwealth Relations whether he will give an undertaking that His Majesty's Government will not transfer the Commission Territories to the Union of South Africa without the consent of their inhabitants.

Mr. Gordon-Walker: The policy of the United Kingdom Government in this matter remains as set out in the following passage on page 4 of an aide memoire handed to the Prime Minister of South Africa in 1935 (Command 4948). The passage reads as follows:
His Majesty's Government will not make any decision until the native population and the white population have had full opportunity of expressing their views, and any views they may express, and any representations which either the native population or the white population may make to His Majesty's Government, will receive the most careful consideration before the Government come to any final decision in regard to the matter.

Dr. Haden Guest: Is it not the case that if the Territories were put in the charge of the South African Union the


conditions of the people living there would badly deteriorate? I hope His Majesty's Government will refuse to allow this transfer to take place.

Mr. Gordon-Walker: I think that is a hypothetical question, and that we should not deal with it until the need arises.

Mr. Oliver Stanley: Is it not better to leave the matter to the satisfactory statement made on behalf of the Government, that there is to be no change in our policy?

Mr. Dumpleton: Have any steps been taken to obtain an expression of view from the population in the Territories?

Mr. Gordon-Walker: No, Sir; the question would not arise until the South African Government asked us to make the transfer.

Oral Answers to Questions — INDIAN BORN BRITISH SUBJECTS (STATUS)

Squadron-Leader Sir Gifford Fox: asked the Secretary of State for Commonwealth Relations how many cases so far have been brought to his attention of persons who have, until now been regarded as British subjects by birth, although born in India, who now find since the passing of the British Nationality Act, 1948, that they are neither citizens of the United Kingdom nor citizens of India and what action it is proposed to take to provide for such cases.

Mr. Gordon-Walker: No such cases have been brought to my notice and I do not think it would be possible for there to be any. The effect of the British Nationality Act, 1948, is that British subjects who are not citizens of the United Kingdom and who fail to obtain the citizenship of any other country of the Commonwealth shall be given United Kingdom citizenship.

Sir G. Fox: Will the Minister look carefully into a case if I send it to him?

Mr. Gordon-Walker: Naturally, Sir.

Oral Answers to Questions — TRADE AND COMMERCE

Italy (Textiles)

Mr. Heathcoat Amory: asked the, President of the Board of Trade whether, when agreeing to the removal of restric-

tions on the import of Italian rayon piece goods into the United Kingdom, he arranged for this action to be followed by reciprocal removal of restrictions on the import of British woollen and other textiles into Italy.

The President of the Board of Trade (Mr. Harold Wilson): We have removed our own restrictions on the assumption that other O.E.E.C. countries will in turn be taking similar measures appropriate to their economic and financial position, but we cannot expect that these will necessarily include every product in our own lists.

Mr. Amory: While I most certainly do not want to oppose anything which would lead to the freeing of inter-European trade, will the right hon. Gentleman not agree that its success must be judged by the degree of reciprocity?

Mr. Wilson: I entirely agree with that statement, and the hon. Gentleman will no doubt have read of further moves which have been taking place on this matter in Paris during the last few days.

Mr. Walter Fletcher: How long will the President of the Board of Trade want before reciprocal action is taken?

Mr. Wilson: Negotiations are going on at the present time both in bilateral discussions and on the conditional list, and, as the hon. Gentleman will have seen, a time limit was set for further propositions at yesterday's meeting in Paris.

Retail Profits, Scotland

Lieut.-Colonel Sir Thomas Moore: asked the President of the Board of Trade whether he is aware of the resentment amongst the retail traders in Scotland by reason of his cut of retail gross profit percentages, and his failure to take consultations with the trade before making it; and what action he proposes to take to meet their criticisms.

Mr. H. Wilson: I was informed of the views of retail traders in Scotland and elsewhere at meetings with their representatives which I held in August about the reduction in retailers' maximum gross margins on utility clothing, footwear and household textiles. The views then expressed were taken fully into account before I decided on the extent of those reductions and before I made the orders


bringing them into effect. I have undertaken to review the position before the end of the year.

Sir T. Moore: As it would appear that the Minister by reason of this particular action and others has lost the confidence of the trading community, does he not think it would be wise for him to resign his office and allow someone else to carry on?

Mr. Wilson: I have the consumers to think of as well as the trading community. I need hardly inform the hon. and gallant Gentleman that the trading community have done far better in the last four years than they have ever done before in their history.

Mr. Cecil Poole: Will the President of the Board of Trade now consider publishing those retail margins in the OFFICIAL REPORT in order that the House may be competent to judge?

Mr. Wilson: If my hon. Friend will put a Question down I will consider it, but to publish them in the OFFICIAL REPORT would take an undue amount of space. I will consider, however, means of bringing them to the attention of hon. Members.

Mr. Ronald Chamberlain: If some of these clothing retailers think they are not doing very well, would it not be a good idea if Debenhams, with their £1,200,000 profit, their 125 per cent. dividend, and their 300 per cent. bonus issue, helped them out a little?

War Damage Claims

Mr. Francis Noel-Baker: asked the President of the Board of Trade what sums have been paid to Mr. R. Sullivan, of 48, Endymion Road, S.W.2, in respect of war damage caused by a flying bomb on 16th June, 1944, to the motor yacht "Halcyon" at Cubitts Yacht Basin, W.4; and whether these sums were intended to cover the loss of the vessel itself.

Mr. H. Wilson: Mr. Sullivan has been paid £110 4s. 8d. in respect of the damage in question, including the loss of the yacht. Mr. Sullivan had not taken out any policy of insurance under the Private Chattels Scheme and consequently was only entitled to compensation under free cover.

Mr. Noel-Baker: In view of the fact that this yacht was destroyed by a flying bomb a short time after Mr. Sullivan had taken up residence there, and that then he fell ill for nine months after the accident, could not my right hon. Friend have a look at it again, because the amount he has quoted is about one-third of the actual sum that Mr. Sullivan paid for the vessel?

Mr. Wilson: That was the limit payable to him under the free coverage scheme, and as he was not covered under the Private Chattels Scheme we could not have gone further. In fact, I ought to inform my hon. Friend that, although Mr. Sullivan was given householder's compensation, there was some doubt whether the tenancy of the yacht counted as a household.

Mr. Keeling: asked the President of the Board of Trade what sum has been paid on claims for war damage to goods insured under the business scheme, in accordance with Part II of the War Damage Act, 1943; and of what sum has payment been deferred.

Mr. H. Wilson: The total amount paid to date under the business scheme, is approximately £48 million, including £2 million representing accrued interest; payment has been deferred for an amount of approximately £46 million, not including accrued interest, which to date amounts to about £10 million.

Mr. Keeling: Is the President aware that the delay in paying something like half the claims is making the public dubious—or rather not dubious—about the benefits to be obtained from nationalising other forms of insurance?

Mr. Wilson: I do not think that question arises in any sense at all.

Mr. W. Fletcher: Can the right hon. Gentleman say how that payment compares with the minimum payments that have been paid overseas in many cases to the same claimants?

Mr. Wilson: That is another question, and if the hon. Gentleman will put it down, I will consider it.

Japanese Exports

Mr. William Teeling: asked the President of the Board of Trade whether he has any statement to make about the


recent cuts in Japanese export prices; what steps he proposes to take to protect British interests; and how far he estimates that they will be affected.

Air-Commodore Harvey: asked the President of the Board of Trade if he will make a statement on the decision of the occupying authorities in Japan to abolish price controls on Japanese manufactures.

Mr. H. Wilson: There is no reason to think that there will be any appreciable increase in imports of cheap goods from Japan into the sterling area in the near future because it will be necessary for balance of payments reasons to restrict imports from Japan for at least the next year. Nevertheless, I recognise to the full the anxiety which certain of our industries naturally feel about the eventual re-emergence of low cost Japanese exports on a large scale. I shall watch this matter closely and I regard it as of considerable importance that in announcing the abolition of the system of minimum export prices last week, General MacArthur's Headquarters made it clear that "dumping" would be prevented.

Mr. Teeling: Can the right hon. Gentleman tell us whether these cuts were made or known about before the present trade negotiations had been concluded, or, indeed, if they have been concluded?

Mr. Wilson: I should want notice of that question. We were informed of the proposed changes a short time before they took place, but we had no opportunity, nor indeed any locus in commenting on them.

Air-Commodore Harvey: Does the right hon. Gentleman recall that on 26th October "The Times" said that the export floor prices had been abolished for all export goods except silk? Does that apply to raw silk or to silk piecegoods?

Mr. Wilson: I should be glad if the hon. Gentleman would put that question on the Order Paper.

Mr. Scollan: Has my right hon. Friend seen a report which was given great prominence in last Sunday's Press, to the effect that the Japanese had undercut us in a £10 million contract for Siam for the supply of locomotives and rolling stock?

Mr. Amory: Is the right hon. Gentleman really satisfied that British interests are properly and adequately represented when these matters are considered?

Cotton Spinning (Re-Equipment Subsidy)

Mr. Austin: asked the President of the Board of Trade if he will give details of the financial cost of subsidies granted under the Cotton Spinning (Re-Equipment Subsidy) Act in its first year of operation.

Mr. H. Wilson: No payment of subsidy under the Cotton Spinning (Re-Equipment Subsidy) Act, 1948, was made in the year ending 13th May, 1949, but one claim has since been paid and claims affecting four other mills are under consideration. Modernisation plans have so far been approved for 44 mills out of a total of 270 in groups registered for the purposes of the Act and plans for a further 12 mills are under consideration.

Mr. Anthony Greenwood: Would my right hon. Friend consider publishing in the OFFICIAL REPORT a list of the undertakings which have benefited in this way?

Mr. Wilson: I should like to give consideration to that question.

Government Factories (Leases)

Mr. Austin: asked the President of the Board of Trade if he will publish in HANSARD a list of Government-owned factories at present leased to private enterprise.

Mr. H. Wilson: Some 1,300 factories are involved. Since the details asked for would occupy so much space in the OFFICIAL REPORT, I will send the information to my hon. Friend and to any other hon. Members who would be interested to have it.

Mr. Austin: In view of the fact that many hon. Members in this House are concerned with these factories in their Divisions, could not we have this published in HANSARD; and, secondly, in view of the fact that these factories were leased in the nation's interests, will my right hon. Friend have a survey carried out to see whether they are used to the utmost capacity?

Mr. Wilson: As I said, this is a tremendously long list and would take several pages in HANSARD. I will consider what publicity can be given to it, and I can make a copy available to the Library and lend one to any hon. Member who would like to have it.

Rubber (Exports to U.S.A.)

Mr. Gammans: asked the President of the Board of Trade if he will make a statement on the negotiations he has conducted with the United States Government with a view to facilitating the export of natural rubber to that country.

Mr. H. Wilson: At the tripartite discussions in Washington in September, the United States representatives stated that the United States Government was prepared to open to natural rubber a substantial additional area of competition, including a modification of the Government regulations relating to the consumption of synthetic rubber, and that it would review its stockpiling programme. Later in that month, the regulations were in fact relaxed so as to enable United States manufacturers, if they so desire, to use an additional 50,000 tons of natural rubber in 1950. The Bureau of Federal Supplies has also recently announced that it will consider offers for limited quantities of rubber for the stockpile.

Mr. Gammans: Can the right hon. Gentleman give any firm figures with regard to the possibilities of stockpiling?

Mr. Wilson: No, Sir, not at this stage.

Mr. W. Fletcher: Were the Dutch, as the next biggest rubber producers, taken into consultation in this matter?

Mr. Wilson: I would like notice of that question.

Mr. Scollan: In view of the proposal to allow £50,000 worth to go into the country, may I ask whether there has been any change in the regulations which said that 62 per cent. of all rubber goods used in the United States must be made of synthetic rubber?

Mr. Wilson: I do not think that my hon. Friend has stated the regulation correctly. The changes do not represent a decision to import £50,000 worth more. It was some modification—I cannot call it more than that—of the regulations.

Yarn Prices

Mr. Austin: asked the President of the Board of Trade if he is aware of the fact that Government maximum price controls, discarded two years ago, have now been replaced by minimum price controls in the form of a price ring determined by the Yarn Spinners Association, thus acting against the public interests, and what steps he will take in this matter.

Mr. H. Wilson: The statutory controls, which were withdrawn in April last, prescribed fixed, not maximum, margins. My hon. Friend will have noted from the answer given to my hon. Friend the Member for Bexley (Mr. Bramall) on Tuesday last that the minimum price arrangements made by the Yarn Spinners' Association appear to be of a kind which can be referred to the Monopolies Commission.

Mr. Austin: In view of the fact that the ex-Cotton Controller, some of his staff and the actual premises are now in the service of this restrictive price ring, will my right hon. Friend take more effective action than referring it to the Monopolies Commission?

Mr. Wilson: We shall keep the operations of this ring under close watch, but the real decision as to whether it is referred to the Monopolies Commission falls on the Board of Trade and not on the officials to whom my hon. Friend refers.

Mr. Emrys Roberts: In view of the Minister's statement that this matter could be referred to the Monopolies Commission, could the right hon. Gentleman assure the House that he will, in fact, take steps to refer it to that Commission?

Mr. Wilson: I cannot give that assurance, because I cannot anticipate what references will be made to the Commission, but I can inform the hon. Member that there is a long waiting list, from which the next list of references will have to be made.

Oral Answers to Questions — DETAINED ALIENS, BRIXTON PRISON

Mr. Peter Freeman: asked the Secretary of State for the Home Department whether he is aware of the long period for which aliens who have landed in this country without permission are


detained at Brixton Prison; and what steps he proposes to take to reduce this period.

The Secretary of State for the Home Department (Mr. Ede): An alien who has entered this country in contravention of the Aliens Order is detained in prison only when there is a risk that he will abscond. The period of detention is no longer than is necessary to make arrangements for the alien's removal, and every effort is made to do this as soon as possible.

Mr. Freeman: Is it not a fact that there is a case in Brixton Prison of a person who has been there since 24th February and another since 14th March? In view of the fact that these persons are not criminals in the ordinary sense, since they have committed no crime except seeking asylum in this country, should they be subject to rigid prison discipline? Cannot my right hon. Friend make some alternative proposition to deal with this matter?

Mr. Ede: If my hon. Friend will give me particulars of the two cases he has in mind I will have them examined. The general policy is as I have stated. I am exceedingly anxious that these men should not be imprisoned unless it is absolutely necessary.

Oral Answers to Questions — CHIEF FIRE OFFICER, FLINT (HOUSE)

Mr. Nigel Birch: asked the Secretary of State for the Home Department why his Department has refused to authorise any grant to the Flintshire County Council in respect of the purchase of a house for the council's chief fire officer.

Mr. Ede: It is the policy of the Government when property is to be acquired for the public service not to authorise the payment of prices in excess of those calculated in accordance with the provisions of the Town and Country Planning Act, 1947. The price paid by the Flintshire County Council was in excess of this figure.

Mr. Birch: Is the right hon. Gentleman aware that this chief fire officer came from South Wales, that the right hon. Gentleman's Department was consulted by the county council about what they

were to do for his accommodation, and that the county council got no answer for three months? During that time they had to get on with the work and to get the officer a house. Can the right hon. Gentleman now see that some grant is paid, possibly not the full amount for the house but the full amount payable under the Town and Country Planning Act?

Mr. Ede: No, Sir. Negotiations have been going on between the Government and the County Councils Association, who have been informed that where prices in excess are paid, no grant will be made.

Mr. Birch: Does the right hon. Gentleman realise the time factor concerned? An enormous amount of administration had to be put into operation when the National Fire Service was turned into the county council fire service. What is one to do while the negotiations are going on?

Mr. Ede: One must pay attention to the needs of economy, particularly in the purchase of real estate.

Oral Answers to Questions — POLICE

Press Letter (Allegations)

Mr. Thurtle: asked the Secretary of State for the Home Department if he has now received the detailed information for which he asked last week in order that he might institute an inquiry into allegations against the police contained in a letter recently published in "The New Statesman," written by a correspondent whose real name was not published.

Mr. Ede: No, Sir.

Mr. Thurtle: Would my right hon. Friend consider, in spite of the refusal of the chief accuser to come forward, whether any other action could be taken in this case apart from a statutory inquiry?

Mr. Ede: No, Sir. One cannot have an inquiry unless one has some evidence to start on. If evidence is produced that the police were, on this or any other occasion, negligent in the carrying out of their clear duty an investigation will take place, but there must be evidence on which to make a start.

Mr. Platts-Mills: Is not the right hon. Gentleman aware that the police now know the identity of the writer, that they at once visited his employers and that he got the sack? Is it not a fact that the act of victimisation which the man feared and which the right hon. Gentleman said could not take place has been brought about by the police themselves?

Mr. Ede: I have seen a statement to that effect in one morning paper but it did not go quite as far as the statement made by the hon. Gentleman.

Mr. Platts-Mills: I am giving the facts.

Mr. Ede: I have made inquiries of the police at Scotland Yard. They have informed me that they do not know the identity of the person.

Cycle Allowance, Liverpool

Mrs. Braddock: asked the Secretary of State for the Home Department if he is aware that the reduction from 5s. per week to 2s. per week in the cycle allowance to the Police Force in Liverpool is causing dissatisfaction; that the 5s. weekly has been in operation for the past 20 years; and if he will give further consideration to the need to revise the 2s. weekly, which is all that he, according to his recent circular, is prepared to approve.

Mr. Ede: I have received representations on this subject from the Liverpool Watch Committee, but the Department's recent circular, to which my hon. Friend refers, was based on a specific recommendation of the Oaksey Committee and I should not feel justified in reconsidering it, more particularly as existing recipients of the higher rate of allowance will continue to be eligible for that higher rate.

Mrs. Braddock: Does not my right hon. Friend realise that the difficulty arising from the reduction of the bicycle allowance will make recruits reluctant to go into the force with their own bicycles, and that the local authority will be compelled in that case to purchase bicycles and to maintain them, which will mean a much greater expenditure?

Mr. Ede: I should have thought an allowance of 2s. a week for a bicycle to be quite adequate compensation for its purchase, maintenance and use.

Mrs. Braddock: Is not my right hon. Friend aware that the scheme has been in operation in Liverpool for the past 20 years and that 5s. has been found adequate to meet the whole responsibility?

Mr. Ede: I am aware that 5s. has been paid in Liverpool, but I agree with the Oaksey Report that 5s. is an excessive sum for this service.

Oral Answers to Questions — LICENSING HOURS

Mr. Longden: asked the Secretary of State for the Home Department if he is aware of the discontent among frequenters of working-men's social clubs, as in Birmingham, because of the licensing laws which, if strictly applied, allow insufficient time to consume drinks ordered before the actual closing time; and if he will amend the law so as to oblige local licensing authorities to grant some such time as is needed for this purpose so that drinks already bought may be consumed at leisure.

Mr. Ede: No, Sir. I have received no complaints on this subject, and I can hold out no prospect of an amendment of the law.

Commander Noble: asked the Secretary of State for the Home Department whether he will amend the Licensing (Metropolitan Special Hours Area) Order, 1949, in order to enable him to consider applications from persons outside the area as at present defined.

Mr. Ede: No, Sir.

Commander Noble: Does the Minister mean by that answer that he has no discretion at all to consider applications which may come from only a few yards outside these defined areas?

Mr. Ede: No, Sir. I have such discretion, but I do not think that I have sufficient experience yet to be able to use it properly.

Oral Answers to Questions — MORPHINE (CLIMBING ACCIDENTS)

Squadron-Leader Fleming: asked the Secretary of State for the Home Department why his Department refused the request of Mr. Wilson H. Hey, a Manchester surgeon, that mountain rescue


squads be allowed to carry ampoules of morphia for the speedy treatment of injured climbers.

Mr. Marples: asked the Secretary of State for the Home Department whether he will introduce legislation to amend the Dangerous Drugs Acts, 1920–32, so as to permit Tubunic ampoules containing one-quarter of a grain of morphia to be added to the medical supplies left at rescue posts in mountainous areas.

Mr. Ede: In consultation with my right hon. Friend the Minister of Health I am considering whether it would be possible to make arrangements, subject to suitable safeguards, for the administration of morphine to injured climbers. I could not approve the arrangements which Mr. Hey has operated illegally since 1934, because they do not in my view provide for adequate safeguards.

Squadron-Leader Fleming: If Mr. Wilson Hey submits to the Home Secretary another plan for the carrying of this drug, would the right hon. Gentleman consider it?

Mr. Ede: Certainly, I will. I am anxious to meet the practical situation, but I cannot wink at absolute defiance of the law for 15 years.

Oral Answers to Questions — CRIMINAL STATISTICS, LONDON

Mr. Maude: asked the Secretary of State for the Home Department how many persons were prosecuted and how many convicted in the Metropolitan Police area in the years 1938, 1948 and during the first nine months of 1949, of offences concerning brothels and other places used for the purpose of habitual prostitution; and how many of such persons received sentences of imprisonment or were fined.

Mr. Ede: In 1948, 90 persons were charged in the Metropolitan Police district with offences concerning brothels and 84 were found guilty. In the first nine months of this year, 62 persons were charged and 55 were found guilty. I regret that the other information asked for is not available.

Mr. Maude: asked the Secretary of State for the Home Department how many male persons were prosecuted and

how many convicted in the Metropolitan Police area in the years 1938, 1948 and during the first nine months of 1949, of persistently importuning male persons for immoral purposes and for offences involving gross indecency; and how many of such persons received sentences of imprisonment or were fined.

Mr. Ede: In 1948, 476 persons were charged in the Metropolitan Police district with importuning male persons for immoral purposes and 444 were found guilty. In the first nine months of 1949, 415 persons were charged and 392 were found guilty. In 1948, 486 persons were arrested for gross indecency between males and 211 were arrested in the first nine months of 1949. Of the 89 committed for trial in 1948, 82 were convicted, and of the 94 committed for trial in the first nine months of 1949, 77 were convicted. I regret that the other information asked for is not available.

Mr. Maude: Can the right hon. Gentleman tell us how it comes about that it is not available? Is it not a matter of records?

Mr. Ede: No, Sir. I understand that the records for 1938 are not in fact available.

Brigadier Medlicott: Is the right hon. Gentleman aware that there is a feeling that the amount of homosexuality in this country is on the increase and that the state of the law needs to be looked into; but, more important still, is the Home Secretary considering the setting up of a Committee to examine the social, medical and moral aspects of this very grave problem?

Mr. Ede: It is a problem which has been present in my mind for some time, and I am considering whether it is necessary to make any formal inquiries into the possible growth of these practices.

Mr. Maude: I am afraid that I did not make myself clear. Will the right hon. Gentleman tell me how it comes about that there are no figures available as to whether these persons were imprisoned or fined? Is that not a matter of records?

Mr. Ede: I will try to ascertain that information for the hon. and learned Gentleman.

Mr. Maude: asked the Secretary of State for the Home Department how many persons were prosecuted and how many convicted in the years 1938, 1948 and during the first nine months of 1949 of offences involving allegations of indecency in Hyde Park and Kensington Gardens; and how many of such persons as were so convicted were sentenced to terms of imprisonment or fined.

Mr. Ede: It has not been possible to obtain this information in the time available but I will let the hon. and learned Member have it as soon as I can.

Oral Answers to Questions — ELECTORAL REGISTER

Mr. Douglas Marshall: asked the Secretary of State for the Home Department if he is aware that, in the Spring Register of Electors for 1950, persons inserting their names are asked to insert their forenames instead of Christian names; and what is the reason for this change of procedure.

Mr. Ede: In the forms relating to the 1949 Register (as in those in use before the war) the expression used was "other names." Some people took this to mean the names of persons other than themselves. To remove this misunderstanding, "forenames" was substituted. The expression "Christian names" is not used because of its restricted connotation, since not all forenames are Christian names.

Mr. Wilson Harris: asked the Secretary of State for the Home Department what are the present numbers of male and female parliamentary electors, respectively.

Mr. Ede: I would refer the hon. Member to the reply which I gave on Monday to a Question by the right hon. Gentleman the Member for Leeds, North (Mr. Peake).

Mr. Wilson Harris: Does that mean that there are at present no separate figures for male and female electors?

Mr. Ede: It is difficult at this short notice since the publication of the register to get a list distinguishing by sexes because there has been a growing practice in recent years for names to be given to individuals which do not indicate the sex of the holders.

Mr. Osbert Peake: How are we then to conduct our election campaigns properly if we do not know the proportion of women electors to whom we are addressing ourselves?

Mr. Ede: I should think the best thing to do is to conduct the campaign on the basis of a common citizenship.

Mr. Wilson Harris: Does the right hon. Gentleman mean that the practice of dividing the list into these two categories has been abandoned?

Mr. Ede: The list is not divided into two categories.

Mr. Wilson Harris: It was.

Mr. Ede: There was a time when certain letters were used which indicated whether the person was male or female. I do not think that practice now exists.

Oral Answers to Questions — PRISONS (SUICIDES)

Mr. Fernyhough: asked the Secretary of State for the Home Department how many prisoners in His Majesty's prisons have taken their own lives in the years 1946, 1947, 1948 and to date in 1949.

Mr. Ede: The numbers are seven, four, five and nine, respectively.

Mr. Fernyhough: Can my right hon. Friend give any explanation for the increase in the figures this year? Is it due to harsher treatment, or are the prisoners left completely without hope?

Mr. Ede: It will be seen that the numbers have varied in previous years. I do not think there is any significance to be attached to them.

Oral Answers to Questions — NATIONAL HEALTH SERVICE

Employees (Superannuation)

Mr. Dodds-Parker: asked the Minister of Health under what regulations superannuation deductions are being made from those employed under the Health Service; what is the authority for these regulations; and where a copy of them can be publicly examined.

The Minister of Health (Mr. Aneurin Bevan): The regulations are the National Health Service (Superannuation) Regulations, 1947—S.R. & O. 1947, No. 1755.


They are made under Section 67 of the National Health Service Act, 1946. They are on sale at the Stationery Office, price 1s. 10d.

Dentists, North-East Suffolk

Mr. Edward Evans: asked the Minister of Health if he is aware that the dentists practising in Lowestoft and North-east Suffolk have withdrawn from the National Health Service Scheme; whether he will state the reasons for this withdrawal; whether he will give an assurance that negotiations are proceeding in order that dental services shall be restored; and what redress or alternative service is available for the public.

Mr. Bevan: I am aware that certain dentists in Lowestoft and Suffolk and in other areas decided not to accept fresh patients under the National Health Service following the reduction in the scale of dental fees in June last. In most areas affected wiser counsels have already prevailed and I hope that Lowestoft dentists will shortly follow this example.

Mr. Evans: Will my right hon. Friend say whether any active negotiation is going on between his Department and the dentists themselves, because there is growing resentment in my constituency at the attitude of the dentists in going out of the scheme? Is there any redress for people who are entitled to this service?

Mr. Bevan: I see no reason for negotiations. Negotiations have taken place between the representatives of the dentists and my Department. In some instances dentists were refusing to accept patients merely on account of the fact that they had plenty of patients waiting, and after they had worked off their waiting lists their resistance to the National Health Service declined.

Colonel Stoddart-Scott: In how many other parts of England and Wales are no dental services available for persons who belong to the National Health scheme?

Mr. Bevan: I cannot say at the moment, but if the hon. and gallant Gentleman will put down a question I will certainly give him an answer.

Mr. W. R. Williams: Will my right hon. Friend make it clear to the dentists that if they voluntarily come out of the

scheme at the present time when we are in these difficulties, the question of their coming back later on will be very problematical?

Mr. Bevan: I am afraid that I have no legal power to refuse to accept into the scheme a dentist who is qualified. I hope that these dentists will realise that their first duty is to their patients.

Doctors' Lists

Mr. Platts-Mills: asked the Minister of Health if he will furnish a list showing the number of general practitioners with 2,500, 3,000, 3,500, 4,000 and over 4,000 patients registered with them under the National Health scheme; and what steps are being taken to reduce those cases where the upper limit of 4,000 patients has been exceeded.

Mr. Bevan: General statistics on this matter are not readily available, but inquiries have been made of a number of areas. As the information supplied by these areas contains a number of detailed figures, I will, with permission, circulate it in the OFFICIAL REPORT.

Mr. Platts-Mills: Will the right hon. Gentleman indicate what steps he is going to take to see that doctors who have more than the maximum of 4,000—I am informed that there are many—bring their numbers down so that young doctors will not find themselves limited to getting jobs as paid assistants?

Mr. Bevan: Steps have already been taken and numbers are being reduced every week. If the hon. Member will look at the figures I am supplying, he will see that they are not as great as he thinks.

Following is the information:

An analysis of the information supplied by six different areas (not necessarily typical of the whole country) shows that the following numbers and percentages of doctors on the medical lists of these areas fall into the different categories referred to by the hon. Member. In compiling the statistics doctors engaged in partnership have been assumed each to be responsible for the average of the number of persons on each partner's list, and doctors employing assistants have had their lists notionally reduced by 2,400 for each assistant.

The total number of doctors practising under the National Health Service in the six areas concerned was 2,429.

Size of List
Number of Doctors
Percentage of total number of doctors


2,501 to 3,000
323
13.3 per cent.


3,001 to 3,500
277
11.4 per cent.


3,501 to 4,000
234
9.6 per cent.


Over 4,000
160
6.6 per cent.

As there is some element of inflation in Executive Council's registers, the figures in columns 2 and 3 may be higher than is actually the case. Executive Council's were asked in November, 1948, to request doctors with lists in excess of 4,000 not to accept additional persons for inclusion in their lists (except relatives of persons already on their lists living in the same house) until their lists had been brought within the permitted limit. Executive Councils generally acted on this request and some have gone further and used their discretion to require doctors to take further steps to see that their lists are brought within the limit.

Specialists

Mr. Platts-Mills: asked the Minister of Health how many potential medical specialists, namely, those with higher medical or surgical qualifications, have been placed in specialist employment since the establishment of the National Health Service; and what proportion of the available potential specialist force does this represent.

Mr. Bevan: The information is not yet available.

Mr. Platts-Mills: If my right hon. Friend cannot get it, will he seek wider by going to the General Medical Council and the B.M.A.? Does he appreciate that if he does not know how many potential specialists there are available and how many of them have jobs, it is quite impossible to plan any kind of system connected with specialists' services?

Mr. Bevan: I am afraid that the hon. Member entirely misunderstands the position. If he had been here for the Debate the other evening he would know that the designation "specialists" has no necessary connection with academic qualifications, and, therefore, the number of potential specialists in the country cannot be known until they are graded.

Mr. Platts-Mills: Does not the right hon. Gentleman agree that most

specialists have that title by virtue of their qualifications? [HON. MEMBERS: "No."] The country needs the benefit of the skilled services of these potential specialists.

Mr. Bevan: If the hon. Member will do myself and the House the service of reading the Debate he will understand the position, which obviously he does not now.

Chiropody Treatment

Mr. Hardy: asked the Minister of Health what arrangements are made in institutions controlled by the social welfare committees for aged and infirm inmates to receive chiropody treatment.

Mr. Bevan: Arrangements for chiropody at homes for the aged and infirm provided by local authorities under the National Assistance Act are at the discretion of the authorities.

Infant Mortality

Mr. Thomas Reid: asked the Minister of Health what was the rate of infant mortality for the latest available period and for a similar period before the war.

Mr. Bevan: The provisional figure for infant mortality in England and Wales for the third quarter of 1949 is 26 per 1,000 related live births; the corresponding figure for 1938 was 42 per 1,000 related live births.

Mr. Reid: Will my right hon. Friend continue the good work of continuing to save valuable British lives?

Mr. Baldwin: Is the Minister aware that during the 20 years of Tory misrule the infant mortality rate was also declining?

Mr. Bevan: Yes, the infant mortality rate was declining but at nothing like the rate it should have done.

Spectacles

Mr. Bramall: asked the Minister of Health if he is aware of the marked discrepancies in the periods of delay in supplying glasses between different firms of opticians; and if he will take steps to ensure that the work is spread more evenly and the longest periods of delay thus eliminated.

Mr. Bevan: I am aware that there are discrepancies and I am in consultation with the industry about the problem.

Mr. Bramall: Will my right hon. Friend press on with the solution of this problem in view of the fact that there are differences as wide as nine months and four weeks, and that undoubtedly many firms are taking orders with which they are quite incapable of dealing?

Oral Answers to Questions — BUILDING OPERATIVES, LEICESTER

Mr. Janner: asked the Minister of Health the number of building operatives employed on new houses on the New Parks Estate, Leicester, in July, 1949, September, 1949; and the number employed upon the same dates last year.

Mr. Bevan: I am informed that the figures are as follow:



1949
1948


July
…
…
589
450


September
…
…
516
587

Oral Answers to Questions — FREE WASHING FACILITIES

Mr. Janner: asked the Minister of Health whether he will take steps to secure, in the interests of hygiene, that free washing facilities should be provided by local authorities in all public lavatories under their control.

Mr. Bevan: While sympathising with the object which my hon. Friend has in mind, I regret that the present time is not opportune for taking such steps.

Mr. Janner: Would my right hon. Friend agree that it is bad economy to have circumstances in which uncleanliness can prevail, and will he see that the local authorities at least will examine this question and provide, if they possibly can, the facilities referred to?

Mr. Bevan: We must have regard to a sensible apportionment of the resources at our disposal, and what the hon. Member has suggested is sheer perfectionism.

Oral Answers to Questions — LOCAL AUTHORITIES (CONFERENCES)

Mr. Keeling: asked the Minister of Health if he will state the facts and figures

on which he based his circular to local authorities expressing his opinion that conferences attended by members and officers of local authorities are too numerous and make too great a demand on the time of those attending them.

Mr. Bevan: I have no complete statistics of the conferences attended by members and officers of local authorities as many of them do not require any consent on my part, but it is common knowledge that many such conferences are held, and in 1947 applications were made to me to sanction the expenditure involved in sending delegates to 91 different conferences. The replies received to my circular show that many local authorities share the opinion I expressed in it.

Oral Answers to Questions — CIVIL LIST

Mr. Emrys Hughes: asked the Prime Minister whether, in view of the urgent need for economy, he will introduce legislation to reduce the expenditure on the Civil List.

The Prime Minister (Mr. Attlee): No, Sir.

Mr. Hughes: May I ask the Prime Minister if he agrees with the advice given on the wireless this morning by the Lord President of the Council that we must keep a hawk-like eye on all extravagance? Is he also aware that I have here a picture of a motor car costing £6,000 supplied to the Duke of Edinburgh and another supplied to a Royal Duchess, and what is he going to do to curb this extravagance?

Mr. Gallacher: That is not joy riding in an ambulance.

Mr. Chamberlain: Since my right hon. Friend assured us that every form of expenditure would come under the closest scrutiny, and as there is obviously plenty of room for economy in the Civil List, is he now telling us that this item of expenditure is sacrosanct?

Oral Answers to Questions — FESTIVAL OF BRITAIN

Air-Commodore Harvey: asked the Lord President of the Council what steps he is taking to ensure that buildings being erected for the Festival of Britain will be completed in time for the exhibition.

The Lord President of the Council (Mr. Herbert Morrison): I take it that the hon. and gallant Member refers to the buildings being erected for the main exhibition of the Festival of Britain on the South Bank. The Festival of Britain Office are working in the fullest collaboration with the contractors, consultant engineers and others concerned, and with them are watching progress closely. They fully realise that there is no time to spare if the exhibition buildings are to be completed in time for the opening of the Festival, but I am satisfied that everything is being done to ensure the completion of the building programme. When I visited the site the other day I was very much impressed by the way the workers on this job are putting their hearts into it.

Air-Commodore Harvey: Is the right hon. Gentleman aware that many of the architect's plans are several weeks behind in being delivered, and as he is jeopardising the taxpayers' money in any case, would it not be better to drop this scheme once and for all?

Mr. Gallacher: In view of the advice which the Minister gave yesterday, that the House is the best place in which to spend the evening, will that apply to the period when the Festival of Britain is on?

Mr. Francis Noel-Baker: Could I ask my right hon. Friend to what extent the plans for the South Bank will have been affected by the item of £1 million announced last week?

Mr. Morrison: I cannot say at this moment but I have promised the House that I will make a statement about that in due course.

Air-Commodore Harvey: Will the right hon. Gentleman confirm whether or not it is a fact that the architect's plans are late in being delivered?

Hon. Members: Answer.

Mr. Wilson Harris: Can the Lord President say in what circles in this country any desire for the holding of this exhibition exists?

Mr. Morrison: Very wide circles. I suggest to hon. Gentlemen that when, with a united party effort—it was united at any rate, and I hope it will remain so—we are taking steps which will much benefit the

country in many ways, I think that hon. Gentlemen—especially the hon. Gentleman who has just put that one—ought not to try to crab them.

Oral Answers to Questions — AGRICULTURE

Hen Batteries

Mr. Peter Freeman: asked the Minister of Agriculture whether he will arrange for an inquiry into the use and practice of hen batteries which involve considerable cruelty to the birds concerned and cause widespread diseases and inferior quality eggs, many of which are unfit for human consumption.

Mr. T. Williams: No, Sir. I would refer my hon. Friend to the answer I gave to the hon. and gallant Member for Ayr Burghs (Sir T. Moore) on 2nd June last, when I said that in the absence of any evidence of cruelty I did not propose to reduce or abolish the battery system of keeping hens. I have no evidence to support the view that, with a normal standard of management, battery birds are either more prone to disease or produce eggs of lower quality than birds kept under other conditions.

Mr. Freeman: Is my right hon. Friend aware that a report sent recently to "The Listener" states that many of these birds are kept in unnatural conditions, are unable to exercise their limbs, and are in an extremely poor state of health, and that neither they, after killing, nor the eggs they produce can be considered as fit for human consumption. Would the Minister take such letters as that into account?

Mr. Williams: I am not aware of the document which the hon. Member is reading.

Sir T. Moore: Is the right hon. Gentleman aware that since I questioned him on this subject in June, I have received many letters from poultry breeders themselves condemning this practice, although not on the lines mentioned by the questioner, that the eggs are bad—they are not—but merely on the question of cruelty? Will not the Minister make further investigation or accept the evidence I have submitted to him?

Mr. Williams: I can assure the hon. and gallant Member that this matter is


constantly under examination and whenever cruelty is proved, which is not the case yet, we will look at it.

Labour Force

Mr. Dye: asked the Minister of Agriculture in view of the possible early finish of the sugar beet campaign, what arrangements he has made for the full employment of hostel labour or casual farm workers throughout the winter on schemes to improve land for fuller production.

Mr. T. Williams: County agricultural executive committees have been reminded of the importance of taking early and energetic measures to ensure that their pool workers are kept fully employed in the coming months. It is not, of course, their function to provide work for casual workers who may be seeking employment, though they will do what they can to help.

Mr. Dye: Is not the point that the necessary work of reclaiming land is the function of the executive committees, and should they not use their fullest endeavours to bring more land into cultivation so as to meet the immediate need?

Mr. Williams: Current instructions to county agricultural executive committees include, first, the calling of meetings of National Farmers' Union county branches to plan Winter work for pool labour; secondly, to canvass farmers well in advance for Winter engagements, both direct and through the N.F.U. branches; and also various other suggestions have been made.

Mr. Vane: asked the Minister of Agriculture what instructions have been issued to county agricultural executive committees regarding the employment of gang labour on road or other work when enough agricultural work is not forthcoming.

Mr. T. Williams: If work in agriculture cannot be found for their employees, C.A.E.C.s are under instruction to make every endeavour to arrange temporary employment in other occupations, in consultation with the local office of the Ministry of Labour and National Service.

Methwold Fen

Mr. Dye: asked the Minister of Agriculture how much land is being farmed by the Norfolk Agricultural Executive Committee in Methwold Fen; and how long it is his intention to continue the present arrangements.

Mr. T. Williams: The Committee farm 423 acres of land under requisition. A decision as to the future of this land will be taken as a result of the review of requisitioned land now in progress.

Mr. Dye: How long will it take to reach that decision?

Mr. Williams: I hope we shall make it before the end of this year.

Pig Ration, Tyersal

Colonel Stoddart-Scott: asked the Minister of Agriculture whether he is aware that Mr. Clayburn, the proprietor of Nirvana Piggeries at Tyersal, near Bradford, has not yet received feedingstuff for his livestock although he took over the piggeries from the previous owner as long ago as August; and, in view of the need for encouraging home-produced meat, whether he will look into the matter and take action to remedy the situation.

Mr. T. Williams: I have written to the hon. and gallant Member about this case. As Mr. Clayburn's holding is under one acre in area and was not used for pig keeping before the war he is only entitled to the domestic pig ration of ½ cwt. a month, and this he has been receiving since last August.

Colonel Stoddart-Scott: As we are importing pork from both France and Belgium, would the right hon. Gentleman reconsider this case? I am only asking that Mr. Clayburn should have the same amount of pig feedingstuff as his predecessor, from whom he bought this piggery?

Mr. Williams: I think I explained that to the hon. and gallant Member in the letter I sent to him yesterday.

Colorado Beetle

Mr. Skeffington-Lodge: asked the Minister of Agriculture to what extent the Colorado beetle has been kept in check during this year; and how its recorded appearances compare with the same period for 1948.

Mr. T. Williams: During the past season no breeding colonies of Colorado beetle have been discovered in this country, whereas there were 11 such occurrences in 1948. Thirty-six single beetles have been found in this country, mainy with imported produce, and 17 on ships, compared with 74 and 278, respectively, in 1948.

Land Sales

Mr. Vane: x asked the Minister of Agriculture what is the policy of the Land Commission for the sale of individual fields or isolated parcels of agricultural land in their possession to the owners of adjoining holdings where such land could be most economically farmed as part of such holdings.

Mr. T. Williams: Under Section 90 of the Agriculture Act, 1947, the power to sell land is vested in the Minister and not in the Agricultural Land Commission. I am always prepared to consider the sale of any land where I am satisfied that such action would be expedient in the interests of agricultural efficiency.

Mr. Vane: Could the Minister say how many acres have been sold since the 1947 Act was passed?

Mr. Williams: If the hon. Member will put down a Question on those lines I shall be glad to reply.

County Executive Committees

Mr. Vane: asked the Minister of Agriculture whether he is aware of the large claims now made on the time of members of county agricultural executive committees attending meetings of committees, sub-committees, inspections and other work even without taking into account reading the increasing papers and memoranda circulated; and whether he can estimate approximately how much time a prospective member of a county agricultural executive committee should be able to give to this work before accepting an appointment.

Mr. T. Williams: I am aware of, and am very grateful for, the considerable amount of time devoted voluntarily by members of county agricultural executive committees to the work of the committees, and I discussed with the county chairmen at a meeting earlier in the year

means of preventing their becoming overburdened with work in consequence of the new duties placed upon them. It is not possible to estimate even approximately how much time a prospective member should be able to give to the work of a committee; it varies as between counties and according to the individual member's personal circumstances.

Sir W. Smithers: asked the Minister of Agriculture if he will state in tabular form by counties the number of staff employed by war agricultural committees, their salaries, the provision for office, motor cars and other expenses, and the total cost on an annual basis to the taxpayer.

Mr. T. Williams: I am sending the hon. Member a statement showing for each county the latest available figures for salaries and travelling expenses and the relevant number of staff. Figures for the other items are not readily available, and their compilation would involve an inordinate amount of clerical labour.

Sir W. Smithers: Does not the Minister think that the attention of the Auditor-General should be called to these figures, and is it not a fact that the expense of the administration of these farms is more costly to the country than if they had been left in the hands of the original owners?

Mr. Williams: As usual, the hon. Member could not be further from the truth.

Hill Cattle and Sheep (Subsidy)

Mr. Lambert: asked the Minister of Agriculture what steps he is taking to safeguard the public purse by ensuring that no substitution of hill cattle and sheep takes places merely for the purpose of drawing the subsidy; and if he has any estimate of the financial loss to the Exchequer from such practices.

Mr. T. Williams: The local administration of the schemes for the payment of subsidy on hill cattle and sheep is in the hands of the county agricultural executive committees, who take full precautions, including the inspection of the cattle and, where necessary, of the sheep, to ensure that subsidy is not improperly obtained. I have no evidence that substitution of sheep or cattle for the purpose of drawing


subsidy is taking place and I can therefore give no estimate of any possible loss to the Exchequer.

Mr. Lambert: Is the right hon. Gentleman aware that a member of the Devon agricultural executive committee has accused farmers of indulging in corruption in order to obtain the subsidies and has urged farmworkers to snoop on farmers, and will the Minister say whether it is now his policy to encourage farmworkers to snoop on farmers?

Mr. Williams: It is not my policy to encourage farmworkers to snoop on anybody, but to encourage good, efficient work. My attention, however, was drawn to the statement made by a member of the county agricultural executive committee, who subsequently has expressed his regret, and the National Farmers' Union are quite satisfied with that.

Women's Land Army (Winding-up)

Brigadier Medlicott: asked the Minister of Agriculture if he will make a statement on the future of the Women's Land Army.

Mr. Janner: asked the Minister of Agriculture if he can yet make any statement on the future of the Women's Land Army.

Mr. T. Williams: I would refer the hon. Members to the statement I made in reply to a written Question by my hon. Friend the Member for Spen Valley (Mr. Sharp) on Monday last.

Economy Measures

Major Legge-Bourke: asked the Minister of Agriculture the full effects of the reductions in expenditure demanded of his Department.

Mr. T. Williams: I would refer the hon. and gallant Member to the reply I gave to the hon. Member for Newbury (Mr. Hurd) on 2nd November.

Rental Inquiry (Form R49)

Mr. York: asked the Minister of Agriculture why no advance publicity was given to the Rental Inquiry before Form R49 was distributed; and whether he is aware that many forms have been destroyed by the recipients.

Mr. T. Williams: The recent rent inquiry on Form R49 was voluntary, and it was considered that the form was sufficiently self-explanatory. The response from those to whom the form was sent has come up to expectations.

Mr. York: Is it not desirable, when the Ministry issue any form demanding or requiring information, that they should give some advance propaganda or publicity?

Mr. Williams: Yes: I agree with the hon. Member.

Captain Crookshank: When the right hon. Gentleman says that the number of replies has come up to expectations, to what sort of percentage does he refer?

Mr. Williams: Forty-seven per cent., as against our expectation of 50 per cent.

Dispossessed Farmers

Sir Waldron Smithers: asked the Minister of Agriculture if he will state by counties in tabular form the number of farmers who have been dispossessed since the war ended, the acreage involved, and the profit or loss on the holdings of those dispossessed on an annual basis.

Mr. T. Williams: It would involve disproportionate expenditure of time and manpower to provide the information asked for, and not all of it could be obtained in any case.

Sir W. Smithers: Are the farmers under the control of the Ministry or the agricultural executive committees running at a profit or at a loss? May I have an answer? If we have to lose money on nuts in Africa, why lose money on farms in Britain?

Sir W. Smithers: asked the Minister of Agriculture if, in view of the fact that members of the Land Board are appointees of his Department, he will revise with retrospective effect the present system so as to allow dispossessed farmers to appear before a judicial committee with the right of appeal.

Mr. T. Williams: No, Sir. I see no reason to alter the appeal procedure set up by the Agriculture Act, 1947, and I would remind the hon. Member that the agricultural land tribunals, to which I presume he refers, are constituted under the Act with a legal chairman appointed


by the Lord Chancellor and two members selected from panels nominated by the National Farmers' Union and the Central Landowners Association.

Sir W. Smithers: Will the Minister be so kind as to read the four lectures by Lord Justice Denning on "The Law," in which he suggests the right of appeal to these tribunals; and will he introduce legislation on the lines of those lectures.

Mr. Williams: No, Sir.

River Boards (Draft Orders)

Mr. Turton: asked the Minister of Agriculture whether he will extend by one month the period in which drainage authorities may send observations upon the constitution of river boards proposed by him under the River Boards Act, 1948.

Mr. T. Williams: The Minister of Health and I are anxious to set up a number of river boards that will take over functions from existing authorities on 1st April next. This can only be done if we deposit Draft Orders establishing these boards before the middle of November. In these cases, we do not feel able to extend the period of one month in which we asked for replies to our letter of 30th September, because of the consequent delay in setting up the boards. But we are ready to agree to a longer period in other cases.

Mr. Turton: Does the Minister appreciate the difficulty in which this places the area of the River Ouse in Yorkshire, which has 60 different drainage authorities within the area, since it is impossible to obtain a considered opinion from those 60 authorities in the time stated?

Mr. Williams: Yes, but I can assure the hon. Member that we have worked within very narrow limits and have done our best to help the various drainage boards.

Major Legge-Bourke: Will the Minister bear in mind that if these river boards are to function satisfactorily it is most important that the maximum amount of agreement beforehand should be achieved, and would he be prepared to consider, in certain cases, a delay in the setting up of the board, even of six months or a year?

Mr. Williams: I have said something like that, although we do not want to delay as much as six to 12 months.

Feedingstuffs (Increased Rations)

Mr. Thomas Macpherson: asked the Minister of Agriculture what increased quantities of animal feedingstuffs it is intended to issue this winter to remedy the shortage of animal feed caused by the recent prolonged drought.

Mr. T. Williams: As my right hon. Friend the Minister of Food has been able to buy increased supplies of coarse grain from non-dollar sources, we shall be able to make a special non-recurrent issue of extra rations of cereal feedingstuffs this winter for cattle, pigs and poultry to offset the effects of the drought. It will also be possible to make some improvements in the ration scales for domestic pig and poultry keepers, including members of pig clubs. I am circulating details of these ration changes in the OFFICIAL REPORT. Some of the increases will come into operation on 1st December, and the remainder on 1st January. I would emphasise that, in view of the uncertainty of future supplies of animal feedingstuffs from non-dollar sources, these changes in no way diminish the need for an increased tillage acreage and the maximum possible degree of self-sufficiency in animal feedingstuffs.

Mr. Macpherson: While thanking my right hon. Friend for this good news, may I ask him to indicate to the House now which categories of livestock will benefit from these increased rations and also how domestic food producers will be affected—I mean the backyard poultry keeper, the small pigkeeper and domestic food producers of that kind?

Mr. Williams: Fat cattle, dairy cows, calves between six and 12 months of age being reared either for milk, or beef, commercial pigs and poultry and domestic pigs and poultry. The total weight of cereals involved is 600,000 tons for the four winter months for commercial breeders and feeders and 140,000 tons per annum for domestic poultry keepers.

Mr. Collins: Will there be any special benefit to holders of less than one acre who have no previous entitlement?

Mr. Williams: I am afraid the all-over rationing scheme is not being changed at this moment, but we are having a special review with that idea in mind.

Mr. Vane: Could the right hon. Gentleman tell us what categories of feedingstuffs are going to be issued?

Mr. Williams: I think cereals, since proteins are not in sufficient supply.

Mr. Vane: Maize, or what is it?

Mr. Williams: Barley, maize or the whole general combination of mixtures.

Mr. Henry Usborne: When does the increased ration for domestic poultry poultry keepers come into operation?

Mr. Williams: That, I think, is 1st January.

Mr. Turton: Does it mean that this increase will still be tied to the 1939 ration, or will it be in the form of a bonus issue such as was given last year?

Mr. Williams: I think they will be given by the easiest means possible in the form of a bonus to all registered producers entitled to coupons.

Lieut.-Colonel Corbett: Will the right hon. Gentleman try to relate all these issues of feedingstuffs more closely to production and productive capacity, rather than to the pre-war basis as at present?

Mr. Williams: I think the idea is to keep the bonus scheme on a basis of known deliveries.

Mr. Berry: In view of the large number of rabbit keepers in South-East England will my right hon. Friend say whether they too will benefit?

Mr. Williams: I am afraid we do not consider rabbits, except their possible extermination.

Colonel Stoddart-Scott: Does that mean that my constituent, Mr. Clayburn, may get some feedingstuffs?

Mr. Williams: Yes, the same increase as every domestic producer.

Following is the statement:

Special Non-Recurrent Ration Issues for Commercial Stock.

1. Fat Cattle.—To improve the condition of cattle being fattened for slaughter

during January to June, 1950, inclusive an allowance of 4 cwt. of cereal will be given on application to the County Agricultural Executive Committee (in Scotland, the local offices of the Department of Agriculture for Scotland). Application should be made before 15th December and the issue will be in 1 cwt. cereal coupons per beast per month for the four months starting December.
2. Dairy Cows.—The "cereal deduction" of 60 1b. of cereal per cow per month will be suspended completely during the two months December, 1949, and January, 1950, which will have the effect of reducing the level of self-sufficiency in cereals to that required in protein, namely, the first half gallon per cow per day. During February to April, 1950, inclusive, the level of self-sufficiency in cereals which farmers are expected to attain, i.e., the first 1½ gallons of milk per cow per day, will be reduced to the first gallon. The "cereal deduction" for those last three months will thus be reduced to 48 1b.
3. Calves 6 to 12 months being reared for milk or beef.—From December, 1949, to April, 1950, inclusive, the monthly ration will be increased by ¼ cwt. cereal, bringing the ration up to 1 cwt. cereal and ¼ cwt. protein.
4. Commercial Pigs and Poultry.—A supplementary issue of cereal amounting to 50 per cent. of the total combined protein and cereal ration already issued under the basic and extended schemes for the period September to December, 1949, will be made in the course of this month in cereal coupons without the need for application.

Revised Ration Scales for Domestic Pigs and Poultry.

The following revised scales will apply from 1st January, 1950, until further notice:

1. Pig Clubs.—The monthly ration of pig food will be increased from 70 1b. to 84 lb. per pig if kept by club members.
2. Other domestic pigs.—The monthly ration will be increased from 56 1b. to 70 1b., and will in future consist of balanced pig food as supplied to pig clubs.


3. Domestic Poultry.—The monthly allowance of balancer meal will be increased from 4 1b. to 5 1b. for each surrendered shell egg registration.

All the above changes relate to Great Britain. A separate statement will be issued as regards Northern Ireland.

Oral Answers to Questions — FORESTRY COMMISSION

Students' Courses, Lyndhurst

Colonel Crosthwaite-Eyre: asked the Minister of Agriculture the number of courses held at Northerwood House, Lyndhurst, Hampshire, by the Forestry Commission and the numbers of students attending; and if he will place in the Library a copy of the syllabus of the courses.

Mr. T. Williams: Twenty-eight courses have been held at Northerwood House by the Forestry Commission since December, 1947. The total number of students who have attended these courses is 454. There were also 12 university courses held with the assistance of the Forestry Commission; these were attended by 295 students in all. There is no set syllabus of courses, as the programme for each year varies according to the special needs. A syllabus is prepared for each course, and specimens can be made available to the hon. and gallant Member if he so desires.

Keepers' Cottages

Colonel Crosthwaite-Eyre: asked the Minister of Agriculture (1) how many of the keepers' cottages owned by the Forestry Commission have main water, gas or electricity laid on to them;
(2) how many keepers' cottages are owned by the Forestry Commission in the New Forest; and the sums spent in 1947, 1948 and 1949 to date, respectively, on their maintenance.

Mr. T. Williams: Only in the New Forest are keepers employed, and in that area 11 keepers' cottages are owned by the Forestry Commission. The sums spent on maintenance of those cottages amount to about £13 in 1947, £46 10s. in 1948 and £143 in 1949 to date. Only the keeper's cottage at Stocking has electricity; main water is supplied to that cottage and to Oak Cottage South, while the remaining cottages are serviced by wells. None of the cottages has gas.

>Colonel Crosthwaite-Eyre: Does the Minister think that the sums which he has mentioned as having been spent on repairs are sufficient, and is he aware that the standard of conditions given in these Forestry Commission cottages falls far below what is given elsewhere in the New Forest? May I ask him further, regarding a recent case where a private landlord expressed willingness to supply water to one of these cottages, why the Forestry Commission have not availed themselves of that offer?

Mr. Williams: I am not aware of the circumstances referred to by the hon. and gallant Member but I will undertake to have the matter looked into.

Colonel Crosthwaite-Eyre: Will the Minister answer the first part of my question: Is he satisfied that the sums he has spent on repairing the 11 cottages, amounting to about £170 in three years, are really sufficient?

Mr. Williams: If the cottages had been in first-class condition this expenditure might have been excessive; on the other hand, it may very well be that it is not sufficient; but I have promised to have it looked into.

BUSINESS OF THE HOUSE

Mr. Oliver Stanley: May I ask the Leader of the House the Business for next week?

The Lord President of the Council (Mr. Herbert Morrison): The Business for next week will be as follows:
MONDAY, 7TH NOVEMBER — Second Reading of the Married Women (Restraint upon Anticipation) Bill [Lords.]
TUESDAY, 8TH NOVEMBER — Second Reading of the War Damaged Sites Bill and Committee stage of the necessary Money Resolution;
Consideration of Motions to approve the draft House of Commons (Redistribution of Seats) (No. 4) Order; and
The draft Civil Defence (Fire Services and Public Protection) Regulations.
WEDNESDAY, 9TH NOVEMBER—Committee stage of the Profits Tax Bill;
Committee and remaining stages of the Local Government Boundary Commission (Dissolution) Bill; and
Consideration of the Motion relating to the Statutory Orders (Special Procedure) Act.
THURSDAY, 10TH NOVEMBER—Debate on the Report of the National Coal Board.
FRIDAY, 11TH NOVEMBER—Concluding stages of the Profits Tax Bill.

Mr. Stanley: May I ask the right hon. Gentleman whether he will be prepared to give an early date for a Debate on the Report of the Overseas Food Corporation?

Mr. Morrison: This is a public corporation and there was some provision about public corporations. I suggest that it might be discussed through the usual channels and we shall see what can be done.

Colonel Gomme-Duncan: Will the right hon. Gentleman give time, I hope at an early date, for the discussion of the effects on Scottish affairs of devaluation which the Secretary of State for Scotland was quite unable to deal with in reply to Questions?

Mr. Morrison: We have had two Debates relating to devaluation lately. I do not know whether the hon. and gallant Member took part, but he had an opportunity of putting the Scottish aspects and he should have done so.

Mr. Henry Usborne: May I ask the Leader of the House if he is going to give time fairly soon for a Debate on the implications of the European Assembly at Strasbourg?

Mr. Morrison: I dealt with that question last week.

Mr. Gallacher: It should be "the complications."

Brigadier Medlicott: Is the right hon. Gentleman proposing to give any time for consideration of the Motion which appears on the Order Paper in the name of the hon. Member for Darwen (Mr. Prescott) relating to Members' salaries?
[That this House regrets that, in view of the necessity in the present economic crisis to give a lead to all sections of the community, no proposal was made in the Prime Minister's statement to the House of 24th October to effect a reduction in the salaries of Ministers and Members of Parliament, respectively, of 25 per cent.]

Mr. Morrison: I do not think so Sir, no.

Mr. Frank McLeavy: In view of the concern of Conservative prospective Parliamentary candidates, as revealed in the very excellent letter in "The Times" today, will my right hon. Friend reconsider the question of giving time to discuss this Motion, so that we may at least indicate on this side of the House that we are supporting the rights of candidates, irrespective of their financial position?

Mr. Morrison: I am afraid I have not seen the letter, although I am told it was a very interesting communication.

Mr. Kenneth Lindsay: The right hon. Gentleman said that he dealt with Strasbourg last week. Well, did he? Do I understand that the Deputy-Leader of the Opposition asked for a Debate on Foreign Affairs and that the Lord President said that Strasbourg might be considered at the same time? Is there to be a Debate on foreign affairs?

Mr. Morrison: That is under consideration, and if it does take place it is conceivable that Strasbourg can come up. That is what I meant when I said to my hon. Friend that I dealt with this matter last week.

Mr. Thornton-Kemsley: May I ask the Leader of the House what is the urgency in the case of the War Damaged Sites Bill, which only reached us this morning, and upon which naturally we want to consult local authorities and professional bodies? It is to have a Second reading on Tuesday next week.

Mr. Morrison: I agree that the time is rather short, but I think it would be for the convenience of public business if it were taken next week. The principle of the Bill is settled. It is not a Bill which imposes duties on local authorities; it is a Bill which permits them to do certain things. I think that in all the circumstances it would not be unreasonable for the House to take it on the day mentioned.

Mr. Usborne: Does not my right hon. Friend agree that the work and implications of the European Council at Strasbourg are sufficient to warrant a full day's Debate in this House?

Mr. Morrison: I quite agree; there are all sorts of things which are sufficient to warrant a full day's Debate, but, if I have not enough days to distribute for Debates on matters which are desirable, I cannot help it. I am sorry.

Mr. Henry Strauss: Will the right hon. Gentleman say in what form the Debate will take place next Thursday?

Mr. Morrison: Yes, on a Motion.

Mr. Emrys Hughes: If there is not time for the House to discuss Scottish economy, will my right hon. Friend consider allotting a day to the Scottish Grand Committee to discuss the matter as it affects Scotland?

Mr. Morrison: The hon. Member had better make representation to the Secretary of State for Scotland or to the Scottish Whip. I forget the rules in that respect. But I must point out that there have been two Debates on the economic situation—[An HON. MEMBER: "Not Scotland."] Yes, we are all in it and I have a faint recollection that the right hon. Member for the Scottish Universities (Sir J. Anderson) spoke.

Colonel Gomme-Duncan: Is the right hon. Gentleman aware that no Scottish Minister answered, and that is very important?

Mr. Morrison: If a Scottish Minister had answered, the hon. and gallant Member and his Friends opposite would have said that too many Ministers were taking up the time of back benchers.

Mr. Churchill: I understand we are going to have a Debate on foreign affairs, although the nuts question comes first. Is that the way the matter rests?

Mr. Morrison: If I may say so to the right hon. Gentleman, that question seems so involved that it gets past my Cockney dullness.

Mr. Churchill: I understand we are to have a Debate on the question of groundnuts; perhaps that recalls the matter to the Lord President's memory. That is to be the first of these weekly discussions and then, after that, we shall require a Debate on the foreign affairs situation, especially in regard to Germany and also in regard to what took place at Strasbourg. The Lord President will remember that he played a distinguished part there.

Mr. Morrison: I hope that the right hon. Gentleman remembers with greater accuracy than some of the Press reports which followed the morning after we had a talk. I do not follow his methods in these matters. He first refers to "these weekly Debates." I have not said anything about weekly Debates. The right hon. Gentleman seems to assume that something has to happen once a week about subjects in which he is interested. He then uses language to the effect that "we shall require a foreign affairs Debate." It is far better to leave these matters to be discussed through the usual channels—I have said that I am quite willing for that to be done—and see how we get on. I dare say that some suitable arrangement can be made. I cannot, however, get into the position that the right hon. Gentleman is able to "require" things. These things have to be done by discussion through channels which have a habit of discussing them in a friendly way, and I dare say that they can do something.

Mr. Churchill: I am very much in favour of things being discussed through the usual channels in a friendly way, but I cannot feel that the use of the word "require" on behalf of the official Opposition was improper because we always have the option of putting down a Vote of Censure.

Mr. Stokes: Will my right hon. Friend not forget, when considering the Debate on foreign affairs, the frustrated position in which so many Members found themselves in the recent economic Debate, and allow a really long extension of time so that all Members can have their say?

Mr. Morrison: It is really no use talking as though there was unlimited time. We are coming towards the end of the Session.

Mr. Stokes: There is all night.

Mr. Morrison: My hon. Friend does not know how he is provoking and tempting me to say something in return because he is not always here on all-night occasions.

Mr. Stokes: That really is a most unnecessarily offensive remark. Does my right hon. Friend realise that I am trying to fight for the rights of back benchers, which he is constantly trying to suppress?

Orders of the Day — PROFITS TAX BILL

Order for Second Reading read.

3.43 p.m.

The Economic Secretary to the Treasury (Mr. Douglas Jay): I beg to move, "That the Bill he now read a Second time."
The simple purpose of this Bill is to carry out the Chancellor's promise to raise the rate of Profits Tax on distributed profits from 25 to 30 per cent., and to leave the rate on undistributed profits at 10 per cent. as from the end of September, 1949. The increase in tax will, in a full year, yield £24 million gross revenue and £13 million net, after loss of Income Tax. The Bill also provides that for Profits Tax purposes any company accounting periods which overlap the date of the change shall be separated into two distinct chargeable accounting periods so that the proper tax rate is charged in each. The "distribution charge" on profits put to reserve and later distributed will be raised to 20 per cent. to bring the total up to 30 per cent. Finally, there is provision in the Bill for forestalling any attempt to evade the increase in tax by declaring higher dividends for periods before the end of September.
The rise in tax is intended first of all to restrain spending, which is by common consent necessary at the present time when profits generally are, as I think all would agree, tending to rise as a result of the inflationary influence of devaluation on prices. The immediate effect of devaluation was to raise the price of bread and flour, and that has had two important consequences. The first one is that by withdrawing purchasing power from the consuming public it will of course exert a big disinflationary influence on the economy. That fact incidentally has been overlooked by many observers who have been misled, by that fallacy in particular, into supposing that the total cuts proposed by the Government were inadequate.
The second effect of this rise in bread and flour prices has of course been to impose an inevitable sacrifice on those with small fixed incomes; and this rise in Profits Tax is therefore intended to ensure that a due contribution is also made by the profit-earning section of the

community, thus enabling these sacrifices to be made on a national instead of on a sectional basis. Such notable efforts have been made by industrial managements in the cause of national recovery during these last years that I cannot really believe that they will object to profit earners making some contribution, alongside the wage earner and old age pensioner, to the new exertions which all of us have to make today.
This change in tax is also one of the cuts which the Government are imposing in order to check inflation. Of course it involves some cut in profits and possibly in dividends; and as the Opposition and the Opposition Press, with that consistency which we always expect of them, are now, I understand, in favour of bigger cuts and more general austerity, it is perhaps surprising that they do not welcome this moderate cut in the incomes of those who can best afford to stand it. Further, by widening the gap between the tax on distributed and undistributed profits this Bill increases the incentive of companies to put their profits to reserve.
The right hon. Gentleman the Member for Saffron Walden (Mr. R. A. Butler), in giving us advance notice the other night of the fallacious arguments which he intended to put forward this afternoon, said that this increase would discourage industry from capital development. That does not follow at all, since it gives an added incentive to the placing of profits to reserve rather than their immediate distribution.

Mr. Godfrey Nicholson: Absolute rubbish.

Mr. Jay: In any case, we must consider it alongside the increase in the initial allowance last summer, which was a large concession to the financing of re-equipment.
Two main criticisms have so far been made against the proposal in this Bill. The first is that the higher Profits Tax will penalise dollar exporters and remove their incentive. The second is that the tax will fall on firms which are not earning extra profits from dollar exports. Of course, those two arguments contradict one another, though again the right hon. Member for Saffron Walden did not seem to notice that last week, when he expounded both of them in one paragraph of his short speech.
We deliberately decided to raise the tax on distributed profits generally, and not to impose a special discriminating tax on dollar exporters, because the latter, even had it been practicable, would have removed the incentive to those exporters. It is just because this tax falls equally on all distributed profits that the incentive given by devaluation to sell in the dollar market will remain; and, of course, in most cases, if the opportunity is seized, the increase in the tax will be small in relation to the increase in profit earned.

Mr. Nicholson: How does the hon. Gentleman claim that this tax equally falls on distributed profits, because it must fall merely on profits which are not distributed; that is how the tax is paid, because there is no legislative authority for recovering this tax from the recipients of dividends.

Mr. Jay: The hon. Member falls into the fallacy of assuming that the same dividend is necessarily paid.

Mr. Nicholson: No. I am very grateful to the hon. Gentleman for giving way. The point is that this tax must be paid out of residue not distributed—the hon. Gentleman will agree with that. If we make that residue larger by distributing less, there is certainly something in it. But he must admit that this tax is entirely paid out of what the company intends to put to reserve.

Mr. Jay: No, not necessarily at all. It depends on the size of the dividend paid. And may I remind the hon. Member that in the Finance Bill Debates in June, 1948, his hon. Friend the Member for Chippenham (Mr. Eccles) argued, on an Amendment by the Opposition, that the widening of this margin would increase the incentive to put moneys to reserve, which is precisely what I am arguing now.
There is really no sense in the complaint that this tax falls on others than those earning extra profits from dollar exports. It is of course intended to do so. After all, the rise in the price of bread and flour will not fall only on those wage earners or others who are working for dollar exports, and therefore this tax is surely no rougher justice than the rise in the price of bread, to which I gather the Opposition does not object.
Some hon. Members opposite have been trying to argue lately that taxation

on profits enters into the cost of production, and therefore raises the price of our exports. I would remind them that the Colwyn Committee on National Debt and Taxation, which is the most eminent group of experts who have ever examined this question, concluded unanimously that taxation on profits does not raise costs or prices. Perhaps I might quote the remarks of Professor Pigou before that Committee. He said that Income Tax, which was then of course the only tax on profits:
is assessed on the profits resulting from trade and industry; and if, as may be presumed people are already charging the prices that yield them the best profit, the removal by the State of a portion of the profit will not tempt them to fix prices differently.
Experience, I suggest, undoubtedly shows that managements in fixing prices do not normally take into account the net income of shareholders after taxation. In any case the Colwyn Committee's conclusion on this was that "the broad economic argument" which I have stated
is true over practically the whole field and for practically the whole of the time, any exceptions being only local or temporary.

Sir Peter Bennett: Will the hon. Gentleman tell us the date when the Colwyn Report was made?

Mr. Jay: It was published in 1927.

Sir P. Bennett: Yes, I thought so. Quite a lot has happened since 1927.

Mr. Jay: Yes, quite a lot; but their conclusions on that subject remain true. If this is true, and if it is also true that the policy of food subsidies, family allowances and so on have prevented a rise in money wages, then it follows—as I have said before and repeat today—that the combination of profit taxation and social services, so far from raising industrial costs and export prices, has in fact kept them down.
The right hon. Member for the Scottish Universities (Sir J. Anderson) apparently admitted the truth of this argument last week when he spoke on this subject, and said that in the short run of course, Profits Tax was "not an element in costs" because taxation "does not fall due until the profits have been made." The hon. Member for Edgbaston (Sir P. Bennett) will see that the right


hon. Gentleman says that is true today and therefore he conceded the main substance of my argument—[Interruption.] The right hon. Gentleman went on to say:
when people are considering whether they will risk their money in some new venture they make a calculation as to what the net return is likely to be. In that respect taxation certainly is in the long run an element—".—[OFFICIAL REPORT, 27th October, 1949; Vol. 468, c. 1541.]
in costs.
But if the right hon. Gentleman is putting forward the quite different argument, that Profits Tax restrains industrial development, he has surely forgotten that the urge for development schemes at the moment greatly exceeds the resources available, and what we have to do at the moment is to exert restraint and not stimulation of such schemes. Hence the need for investment cuts which, strangely enough, the right hon. Gentleman himself described as pitifully small. In any case, if the need were at the moment to encourage physical investment, whatever becomes of the other argument used by the right hon. Member for the Scottish Universities that we ought to check what he called "capital inflation" by an "intelligent use of interest rates"—which means of course higher interest rates? He apparently wants to encourage and to discourage additional industrial development at the same time.
I think the main argument, however, which has been used against the Profits Tax is the one, now so fashionable with some people, that somehow incentive is being destroyed over the field of industry. Just exactly what is this Tory argument about incentive? I think we ought to get it clear. Some people talk and write at this moment as if the ordinary motive of gain had been removed from this country and that we had introduced a system under which the great majority of people are simply working for love. This is a mythical world, created out of the imaginations of hon. Members opposite. If one goes out into the world as it really exists, and not as it exists in the imagination of hon. Members opposite, one finds people working for wages and salaries, keen to get jobs, keen to keep them; and keen incidentally to get promoted and even sometimes to accept company directorships.
Hon. Members opposite often talk on this subject as though they never went into the real world of industry at all. A very large number of wage earners are in fact covered by piece rates and bonus schemes of one kind or another, and the majority by overtime arrangements. The Government have continually encouraged the spread of those arrangements during these last few years, and greatly reduced the incidence of Income Tax on overtime in the Budget of April, 1948. Therefore, it is no more true to say that the ordinary motive of personal gain has been taken out of our national life, than it is true to say that that is the only motive which inspires men to action.
Or is the Tory argument about incentives perhaps this: I have sometimes heard it said that some wage earners are earning such large wages, and profit earners such easy profits, that they do not wish to work a full week, but prefer to "buy leisure" instead? Well, if that is the Tory argument, then they should presumably support this increase in Profits Tax, because it will act as an incentive to the profit earners to be more energetic. It is perfectly true that one effect of high taxation in this country over recent years has been to induce people to work for their living who formed an idle, leisured class a few years ago. We are very glad to have recruited the valuable services of these people into the productive market by the tax incentive.
Or alternatively, is the argument this; that the taxpayer has got so little left after paying taxation that he does not think it worth while to work any harder? If the contention is that we want to establish a closer link between the volume of individual effort and the size of the individual reward, I should like to ask why it is that the right hon. Gentleman the Member for Warwick and Leamington (Mr. Eden), who is not here today, proposed that we should simultaneously make a large cut in the food subsidies—which would of course reduce real wages—and at the same time increase benefit payments based on need. Whether one thinks that is a good thing to do or not, it does not strengthen the link between effort and reward, but directly weakens it. If that is the main proposal of hon. Members opposite, it is quite inconsistent with their argument.
I suggest that perhaps none of these is the real Tory argument. The real Tory argument is that there are, they think, two sections of the community. One is to be driven to work by the fear of hunger and unemployment; and the other is to be tempted to work by the expectation of great wealth. It is indeed the "two nations" over again, and the carrot is to be reserved for one nation and the stick for the other. That is why a cut in profits is, in the Tory view, a vicious partisan class-conscious aberration, whereas a cut in food subsidies and social services is a great constructive piece of statesmanship. By their attitude to this increase in Profits Tax, which incidentally I do not believe is shared by the great majority of patriotic industrialists in the country, the Tories are proving that that is what they really mean.
At present we all agree that if the country is to close the dollar gap, and achieve the indispensible rise in exports which we must have, there must be some temporary fall in consumption. But the Tories say that out of this smaller cake the profit earner is to have a larger slice. That can only mean that they are asking the wage earner and the pensioner to accept a still smaller slice of a smaller cake. We utterly repudiate that sectional and reactionary doctrine, and we believe that the country will repudiate it also.
It is not surprising that in these circumstances the reason given by the Leader of the Opposition last week with such obliging candour for his refusal to inform the House of Commons of his party's policy, was that he is afraid that some Member of the House might then go and tell the electorate. The right hon. Gentleman is perfectly right in thinking that if the electorate knew his party's policy of more for the profit earner and less for the wage earner, they would regard him as what he himself called, an enemy of social welfare. But he is quite wrong in supposing that we shall join in his conspiracy to conceal his intentions from the electorate.
The truth is that the Opposition's case against the profit taxation, ostensibly based on the argument about incentives and all the rest of it, is not a serious economic argument at all, but is a piece

of political humbug, designed to destroy any national policy of fair sacrifice, and to upset the balanced series of economies which the Government have designed to make both adequate in amount and national in scope. We believe that the more difficult the times become and the greater the sacrifices that have to be made, the greater and not the lesser is the need for fair shares, for planning and for equality.
Greater inequality is a luxury we cannot afford, with the menacing dollar gap threatening us today. The country, therefore, will take note that while we in the Labour Party stand for fair sacrifices for all at this time, on a national basis, the Opposition, as usual, are putting sectional interests first; and indeed are prepared, as their Leader made quite plain in his speech last week, to undermine our national credit by reckless propaganda, and sabotage the economic recovery which devaluation has made possible.

4.6 p.m.

Mr. R. A. Butler: I beg to move to leave out "now," and at the end of the Question to add "upon this day three months."
I shall have something to say in the course of my remarks on ail the so-called arguments put forward by the Economic Secretary to the Treasury. I have had occasion when taking part in these Debates on finance before, to draw the attention of the House, or the Committee as it might have been on some occasions, to the fact that the hon. Gentleman is unable to put forward a clear argument in support of Government Measures. He resorts invariably to something which he knows, or hopes, will appear on the front page of the next day's "Daily Herald." He does that deliberately owing to the fact that his party are incapable of facing the country and are trying to steam up as much class hatred and misunderstanding in the intervening period as they possibly can.
The theme of the Chancellor of the Exchequer in introducing devaluation was that it would result, in his words of 27th September, in the average profit earner tending:
… on the whole to benefit by the change especially in the case of exporters."—[OFFICIAL REPORT, 27th September, 1949; Vol. 468, col. 26–27.]


Apparently his objective was to remove extra profits which came to certain people as a result of the devaluation proposals. It might have been interesting had the hon. Gentleman given himself the trouble of devoting his attention to that subject and then given us some arguments in support of the Chancellor's proposal. Instead, he put one of the most extraordinary arguments which I have heard put forward either by an Economic Secretary, which fortunately we have never had before in any other Government, or by any living economist. That was that the fact that an extra tax is clamped on an industry means that there is now an extra incentive to the very people we want to encourage to export—namely, exporters to dollar markets—to do their best.

Mr. Jay: That is a complete distortion of my argument. My argument was that devaluation gave the additional incentive to the dollar exporter, and a general tax on profits does nothing to diminish it.

Mr. Butler: Our argument in response is that as it is absolutely vital to our national welfare that exports to dollar markets should increase, in order that we may not only maintain but improve our trade with hard currency areas, it is essential to give some definite encouragement to exporters to dollar areas. What this Bill deliberately does is to give them a smack in the face just at the time when the Government want their help most.
The hon. Gentleman continued with some material as to which, normally, one would doubt whether it had any relation at all to the Bill—namely, a picture of what he regards as Tory policy. He said that the Tory policy was to spur on one section of the population by encouraging a period of hunger and unemployment and to spur on the other by gross profits and wealth. He said that our view was that we wished to divide the nation into two nations. That is in direct contradiction of all we stand for on this side of the House. It is not only in direct contradiction, but the hon. Gentleman should remember that the tribune of the people, the Minister of Health—now, we are told, the most popular man in the Labour movement—devoted his philippic of an hour and a quarter in a recent Debate exclusively to the theme of defending what he called

"our people" against "your people," thereby dividing the nation in his speech completely into two.
That is exactly the opposite of what our policy has been. I propose to take the hon. Gentleman's arguments as they were made. When the hon. Gentleman says that it is the object of the Conservative Party to give the pensioners an ever smaller slice of a smaller cake and he then has the audacity to misquote the speech of my right hon. Friend the Member for Warwick and Leamington (Mr. Eden), I would remind him that my right hon. Friend the Deputy-Leader of the Opposition deliberately said that in the event of the policy which he was discussing coming into force, it would be necessary to give the pensioners the extra reward they need to make up for the very high cost of living which must be attributed entirely to the policy of His Majesty's Government.
The fact that pensioners at 26s. per week, or 42s. a week for two, are suffering from a rise in the cost of living of 11 points since the new index was inaugurated, and of some seven or more points, which is the calculation which the "New Statesman" added to that, making a total increase of 18 or perhaps 20 points in the cost of living, is due to the disgraceful and disastrous financial policy adopted by right hon. Gentlemen opposite. It is they who are cutting at the bottom of the pensioners' living wage, it is they who are undermining the social services, and if the hon. Gentleman thinks that he can, on a purely financial Bill, when we expect arguments which are related to the Bill, get away with a political argument such as he has made. I hope that he will realise that there are debaters on this side of the House who can and will answer him back immediately.
I should find it interesting, and perhaps the House would find it interesting, if we were now to come to the financial and economic questions which are the main sphere of our discussions today. We should be the first to acknowledge that in this crisis all sections must share alike, and I must confess, personally, that, if a method could be found of making these shares equal and in the national interest of economy, I would not rise at this Box to speak against it. I think things are


far too difficult, though whether the hon. Gentleman realises it or not I do not know. Every serious-minded student of our financial and economic position today knows the state of our economy, and it is no part of my speech to try to prove that one section of the people should get off lightly and that others should suffer.
We would not object to this proposal if we thought it was sound economics from the country's point of view, or if we thought, as the hon. Gentleman said, that it would restrain spending. We do not believe that it is in any way either deflationary or, to use the more modern expression, disinflationary. We believe that it has no such effect. We believe also, as I said in the very few remarks which I offered on the Ways and Means Resolution, that it will result in further inroads on industry's reserves and its re-equipment funds. We believe, in fact, that this is a political gesture which was not in the cuts programme, but which was produced four weeks later as a political gesture introduced at a time when the Government were having a difficult period with organised labour, and that it has now been promoted and is regarded as a major cut.
I cannot imagine how the extra imposition of taxation can be regarded as a reduction of expenditure, or how it can be regarded as one of a number of other cuts. If the hon. Gentleman wants to know whether taxation raises costs or not, I, not being an economist, as I have explained to the hon. Gentleman on many occasions, will reply that, whatever the economists may say, an increasing burden of taxation upon industry must have the result that industry's funds for replacement are gradually eaten into, leading eventually to a rise in costs. In fact, in simple English, when we impose an extra burden on an animal, it is bound to feel that burden in some way, and I cannot imagine that, taxation at the high level at which it stands today, taking some 40 per cent. of the national income and making such heavy inroads on the reserves of industry, will not in some way be passed on in costs.
What is even more disturbing is the discrepancy in the Chancellor's statements. I think the Chancellor himself realised this point because, on 6th April, he said this:

But there is not much further immediate possibility of the redistribution of national income by way of taxation in this country."—[OFFICIAL REPORT, 6th April, 1949; Vol. 463, c. 2083.]
Here we have a further example of the Chancellor eating his own words, and it really is most disturbing in the world of finance and industry, which is at present intensely disturbed through wondering to what extent it can rely on the published, written or spoken words of Members of the Government.
Let me now address myself to the Chancellor's arguments that he wishes to hit the profit-earner—and I say "hit" in no unreasonable tone—because he wishes to obtain money from the profit-earner, tending on the whole to benefit by devaluation, and especially from the exporter.

Mr. Scollan: Would it not be fairer to describe him as the "profit-taker" rather than the "profit-earner?"

Mr. Butler: It is the Chancellor who wishes to take the profit from the profit-earner, tending on the whole to benefit by devaluation, and especially the exporters. We think that it would be wiser if he were to encourage more exports to the hard currency areas and to give some encouragement to exporters. We have been fortified in this by the Washington communiqué which came out during the period when I was on the North-American continent, and which used these words:
Agreement was reached to create appropriate incentives for exporters to the dollar area.
That is an agreed international communiqué on which both the Chancellor and the Foreign Secretary expressed their satisfaction, and which presumably they were going to carry out.

Mr. Jay: May I point out that it was carried out by the act of devaluation?

Mr. Butler: I really cannot accept that. Neither the hon. Gentleman nor myself was at Washington. No doubt he has excellent sources to which to refer. These points in the Washington communiqué were announced after the devaluation decision had been taken, and they were regarded as a policy tending to remove difficulties and be of assistance to this country and not to hurt the interests of this country and its industries. They were designedly introduced to provide the proper incentives in order to help


exporters to the dollar area. If the hon. Gentleman makes out that that was done by devaluation, it makes nonsense of the whole communiqué. If it does not, the sooner we debate what the communiqué does mean the better. So far as I can see, we are now already breaking our part of the understanding which we reached in regard to the Washington communiqué by imposing extra fines upon our own exporters to the dollar area. I think that is not only shown to be an ill thing in this country, but that the whole policy followed by the Chancellor of the Exchequer is likely to do great harm to the whole of our international relations.
Let us examine this question to which the hon. Gentleman gave but a minute of his time. What percentage of our industry is likely to profit by devaluation? Perhaps the Financial Secretary will answer that point. The Government have resources at their disposal and it would be interesting to know on what basis the Chancellor has made his calculations. So far as I can see—and I am trying to make a fair economic argument—some exporters will do better; for example, exporters of tin, oil, and so forth. But many others will do worse, owing to the increase in costs of raw materials, not only from the dollar area but also in an increasingly marked degree from the sterling area itself.
The latest public statement which I have seen on this matter was made by Sir Miles Thomas to the staff of B.O.A.C. on 31st October, which is only a few days ago. He said:
Devaluation will cost us close on £1 million in terms of increased fuel and lubrication costs and in enhanced station costs in hard currency areas. Offsetting that is a gain of £400,000 in increased earnings from the hard areas. That means we are £600,000 worse off.
It is possible to give many other such instances. I know of examples in the general range of the textile industries where the extra cost of raw materials will more than outbalance the extra advantage of selling in the dollar market. I must ask the Government—to fortify, I was going to say, but at least to make the case for the Chancellor—and to tell us to what extent they imagine British industry as a whole will profit by devaluation, and whether the profit will not be more than offset by increased costs.

These increased costs will not result only from the difficulty in buying raw materials. They will also result from the big effort which many of our industries will have to make in transferring to the dollar market if they are not already selling in a hard currency area.
There will be risk; and in many cases great expense. In many cases new sales organisations will have to be set up. And even when they have done all that—let us face this fact, which I do not believe any hon. Member can deny—there is no absolute necessity for the United States of America to take any large proportion of our manufactured goods. I believe that they will because, as far as I could see when I was on the American Continent, there is the utmost goodwill towards the acceptance of British exports, and anybody who makes an effort will, I believe, be able to make a small dent on the American market. I was very comforted, when discussing this matter in Canada, to be reassured that in Canada it may even be possible to make a largish dent by exporting more to Canada, because I think there is intense goodwill there.
But what they say in Canada, and to a less extent in America, is that our sales organisation must be improved, our brands must be more obvious, our packing must be better, and distinguishing marks must be more easily distinguished, as otherwise the housewife will not buy British commodities. All this will cost money, and at this very moment the Government choose, not to give encouragement to exporters, but to impose an extra fine on those who try to export to the dollar market. This seems to me to be on a par with the Government action over insurance. The question of nationalising insurance at once raises the whole question of the amount of dollars we earn by insurance on the North American continent. It is folly for the Government at this moment to impose an extra tax or fine and not to give that encouragement which human nature demands and which is so important to our national recovery at the present time.
The Government are, in fact, so jealous of success that success must be penalised even when in the national interest. Since a just measure cannot be worked out, rough justice insists that all industry is hit at one and the same time. I should like the hon. Gentleman to reflect what


would be the effect on the working population—about whom he has rightly talked—if at this moment, for the purposes, as he calls it, of disinflation, an extra charge were to be put on men working overtime. He would get a howl from some of his friends and we from our own friends who support us in our districts. It is absolutely wrong not to recognise that success should be encouraged and that without incentive and encouragement one cannot get the results one wants at the present vital time.
I want to ask the hon. Gentleman, in passing—and perhaps the Financial Secretary will reply—whether the Government have considered any of the various alternatives for giving rewards to those who succeed in exporting to the dollar market. I will not specify any of the suggestions, but one, which is in vogue, I believe, in one or more foreign country is to permit a certain proportion of foreign exchange to be retained for the purpose of helping with sales, and so forth. Most of these schemes appear to be unsound, but if there is any sound scheme which can be worked out with the skill and energy of the Treasury, I hope that the Financial Secretary will inform us, and tell us whether any incentive can be found to encourage those who are devoting their activities to the dollar market.

Mr. Ronald Chamberlain: The right hon. Gentleman is aware, I suppose, that the Board of Trade are taking very extensive measures with regard to guaranteeing and underwriting risks in connection with the expansion of exports—advertising, and so on?

Mr. Butler: That is a different matter, but it is refreshing to get from the Government's occasional supporters a glimpse into their policy. We certainly got nothing from the hon. Gentleman himself.

Mr. Chamberlain: It was announced in the House.

Mr. Butler: I pass now to the main question of whether extra tax will or should result in the reduction of dividends. Here I want to say that, from my experience of those who conduct our major industries and, indeed, our smaller industries—I know that others on

these benches will speak with more expert knowledge of industry than I can—the normal industrial leader today, strange to say of a highly moral character, feels that he is under a double obligation at the pesent moment in regard to policy in this matter. First, he feels that he should treat the equity shareholders with absolute fairness—and the very word "equity" makes that an obvious necessity and an obvious obligation on any leader of industry. Secondly, he feels that he should respect the Government's injunction not to raise dividends at the present time. The result has been that in most industries—in fact, the vast majority, as I shall show—equity shareholders have not been granted increased dividends, even though they might have been justified by the profits, owing to the Government's appeals. The "Bulletin for Industry" for September, 1949, issued by the Treasury, stated:
In the first year of voluntary dividend limitation, the percentage of industrial companies which did not increase their divdends was 93.1 per cent. (in terms of issued capital). In the four months since February, when the recommendation to continue the policy went out, 89 per cent. of the companies declaring dividends gave no increase, and 8.6 per cent. announced reductions.
I should have thought that was a very satisfactory result from the Chancellor's appeal—the hon. Gentleman nods his head—but what do we get from the Chancellor? When he announced his proposals, he used these words:
But I should warn industry generally that if there is any further breaking away, I shall consider myself at liberty to introduce legislation to restrict dividends in the next Finance Bill."—[OFFICIAL REPORT, 27th September, 1949; Vol. 468, c. 26.]
That type of threat is resented by industry, and whether hon. Gentlemen opposite like it or not, England is made up of industry as well as of those excellent people who work for their living in industry, and if one side insults the other, then there will be no peace in industry and no satisfactory results.
We say quite sincerely to the Government that the time is coming when industry will lose—if it has not already lost—confidence in this Government because it believes it is being perpetually threatened and assailed by His Majesty's Ministers. If the hon. Gentleman does not believe me, I would refer him to what the Home Secretary said in his


address to the King's College Labour Society on 25th October last. He said:
The answering of that problem"—
exports to dollar area—
will involve us, I have no doubt, before it is solved, in some measures of direction that have not hitherto been applied.… If goodwill is not sufficient to ensure our survival, it may be necessary to direct the policy of planning over a wider range than we have at present applied it.
He talked about goodwill. The way to destroy goodwill is for the Chancellor to use language such as he has used in answer to the legitimate and proper response of industry to his own request.
When we come to the statement of the Lord President in this House on 31st October last, that through their party organisation outside, my party, the Opposition, are going in for a policy of economic sabotage, then we find that this is the crescendo of insult. It is no wonder that industry at the present time has completely lost confidence in both the intentions and the language of right hon. and hon. Members opposite. I invite the Government and the Lord President, or the Financial Secretary if the Lord President does not attend our Debate this evening, to deny that statement, and if he will not deny it to give us the proof upon which it is based, because we declare it to be absolutely false. When we turn to the great efforts that have been made by private enterprise and consider that 80 per cent. at least of our national recovery and of our increased exports of which the Government brag are due to private efforts and the co-operation of private enterprise with the Government, it is disgraceful to use terms like "economic sabotage" in regard to the efforts of private industry at the present time.

Mr. Jay: Since the right hon. Gentleman is using this strong language, may I point out that what the Lord President said referred to the Tory Party and not to British industry?

Mr. Butler: I know it was about the Tory Party, and I am denying it on behalf of my party. I am saying that these matters are noticed by industry, in addition to the statements which I have read out and which have been made by the Chancellor of the Exchequer and by the Home Secretary in regard to industry

itself. The cumulative effect of these statements is to cause a great feeling of mistrust in the country and lack of confidence in the statements of hon. Members opposite.
Industry has to find this extra tax sometime. Whether hon. Gentlemen opposite like it or not, I can tell them that the main result of this tax will be to take money from the reserves of industry itself. In most cases, taking into consideration the first point that I made earlier about the obligation which the industrialist feels, he will not feel that he can put himself in the position of reducing the dividend to the equity shareholder in many cases. Of course, in the eight or nine cases that I have mentioned there has been a reduction of dividend, but in general it is unlikely. It is more likely that in the majority of cases this money will be taken from the reserves of industry itself. One fact that we must get quite clear about the taxation of industrial profits is that if one computes the rate of Income Tax and add it to the Profits Tax, both on the distributed and undistributed profits, the whole incidence of this combined taxation falls on the portion that is not distributed, because that is what remains in the industry and that is what has to bear the tax after the dividend has been paid.
I have worked out the effect of this penal taxation of industrial profits in regard to the reserves of industry. It is a striking fact that if we took profits in an average industry amounting to a sum of £300,000 in a year, and if we were to distribute three-quarters and plough in one-quarter, the effect of the combined Income Tax and the incidence of Profits Tax would be that there would be nothing at all to transfer to reserve. Further, I have worked it out that if we were to distribute two-thirds and plough in one-third, the combined accumulation of the Income Tax at 9s. in the £ and the incidence of the two types of Profits Tax would leave a net addition to reserves, after paying two-thirds in dividends, of £16,500 only out of £300,000. I have similarly worked out the figure where half the profits are distributed and half are ploughed in, on the same figure of £300,000, and the effect of that, taking the combined incidence of the taxes, is that only £49,500 would be transferred to the reserves of the industry.
Those are very serious figures, and that is why I said in the earlier part of my remarks that this is not, in fact, an economic tax, because the reserves of industry are, or should be, something rather above the ordinary banter of party politics. The reserves of industry are the reserves upon which the whole future expansion depends and from which new equipment must be built; they are, in fact, a form of savings which are vital to our economy at the present time.

Mr. H. D. Hughes: The right hon. Gentleman has made a powerful case on behalf of the reserves of industry, with which I think we all agree. But that being so, is he arguing that the people in charge of the finances of industry at present, recognising the importance of reserves, are still prepared to put their dividends first?

Mr. Butler: I have said that there is equity to take into consideration, and that is just as much a moral argument as any that the hon. Gentleman has put forward. It is perhaps strange to hon. Members opposite that there are moral considerations in the policy of industry, just as they themselves have moral considerations when they put forward their arguments.

Mr. Chamberlain: rose—

Mr. Butler: I am stating, whether the Government like it or not, what is likely to be the result within industry of the extra incidence of this tax. I am saying it, not thoughtlessly or heedlessly, but after taking great trouble to find out what the likely result will be.

Mr. Chamberlain: rose—

Mr. Butler: I do not think it is necessary for me to give way any further, because the first man in the Kingdom to recognise this fact has been the Chancellor of the Exchequer, who deliberately in his last Budget increased the depreciation allowances for wear and tear. If that is the case—and he has appointed a committee to look into this matter—it seems to us very strange that he should have decided to produce a tax which, he must know from his knowledge of industry and from what his experts tell him, is going to fall on reserves at exactly the moment that his committee is supposed

to be investigating the question of wear and tear allowances, their adequacy and their effect upon the reserves of companies.
The real truth is that there is absolutely no consecutive thought in the Government upon these matters. They cannot stick to a sinele line for more than a few weeks at a time. Economics have become a purely political affair in the minds of hon. Gentlemen opposite, and in order to be what is called "fair" to one section they make themselves deliberately unfair to another. What is more, they not only try to be deliberately unfair but they want, in order to succeed, for example, with organised labour, to seem to be unfair. If they can seem to be unfair, they satisfy their own consciences that they have done the best thing by the country.
I am convinced that this tax will fall upon the reserves of industry and will militate against the best interests of the working people in this country, because without better equipment, without modernised industry, which is one of the greatest national needs, and with the extra incidence of a tax like this, affecting as it does the reserves of industry, I do not believe the workpeople will find that they can do such satisfactory work or that industry will be so efficient.
Without wishing to detain the House more than a few moments longer, I want to repeat what I said earlier—that I do not believe this Bill will have a disinflationary or deflationary effect. A large part of the money of companies is held in company reserves and the effect of that is to constitute a form of savings. With the virtual collapse of National Savings at the present time under His Majesty's Administration, I think it is very unfortunate that this form of savings should be further raided. If this money is transferred to the Government, the effect is likely to be somewhat as follows. If it is spent on capital expenditure, I do not think there will be a disinflationary effect. If it is spent on current expenditure, it will have an inflationary rather than a deflationary effect. Therefore, I do not really believe that the hon. Gentleman's argument, that this is a deflationary process, really holds water at all.
I further think that the effect of this tax on foreign investment will be far


from healthy. The Washington communiqué, to which I have already referred, said that both sides agreed to study the problem of incentives and a suitable environment in their countries for a high level of private investment. An additional tax upon industry at this time will not result in a proper incentive for the private investment of money from any other quarter. For those reasons, I think it is very unfortunate that the Government should have thought that this was an easy way out of the problem and also thought perhaps that the arguments against it were not as strong as, in fact, they are.
My final objection is that this tax, which may appear small, is a thoroughly uneconomic tax. It is discouraging and is likely to have a far more serious effect on the reserves of industry than hon. Members opposite realise. Above all, it is likely to have a very bad psychological effect on enterprise in industry at the present time and will have no positive result in aiding national recovery.

4.41 p.m.

Mr. Diamond: If this side of the House comes to be known as the party supporting nationalisation, then to me, at all events, the other side of the House is the party supporting rationalisation, because I have never heard a case better built up on completely insecure, indeed almost nonexistent foundations than the one which the right hon. Member for Saffron Walden (Mr. R. A. Butler) has just built. I hope I may have the opportunity, without delaying the House too long, of dealing with all the arguments he put forward, so far as they relate to this Bill.
May I, first, say that I was astonished not so much by the content of his speech as by the things he missed out. He did not make one reference in the whole of his speech to the condition of this country, which we are all supposed to be trying to help. He merely put the case of the industrialist. He said that the industrialist might be a little worse off as a result of this tax and therefore that we must fight the tax and use every argument we can to support our opposition to it. He did not put that in its context at all and he did not say that we are all in this fight together, that we have all to do something more, and that if there is sac-

rifice to be borne we have all to bear a part of it. He did not say that in the interests of this country, which means in the interests of everyone—employer and employee alike; industrialist and wage earner alike—we ought to try to do some thing to help things along and that, as we are all in the same boat, we should not spend all our time trying to kick holes in the boat.

Mr. R. A. Butler: The hon. Gentleman must read HANSARD tomorrow. I used language to say that we would be the first to agree that the cuts should be fairly shared out and to say that if the Government had suggested a tax which we thought would achieve the result in the right way and was not uneconomic, then we should support it. I refer the hon. Member to HANSARD.

Mr. Diamond: I recollect very well what the right hon. Gentleman said, and that was why I was buoyed up to hope that something quite different from what he in fact said would be forthcoming in the course of his speech. In fact it was not, and we were disappointed. After all, I doubt whether this can be called a tax at all—it is nothing more than a mere token. The right hon. Gentleman said this tax might be called small. "Might be" is a good term. It is £13 million net. Is that a large tax? Is that anything which can be measured in terms of the industrialist or in terms of costs?
The right hon. Gentleman said he was not prepared to pay any respect to what the Colwyn Report said, although some of the best brains in the country were among that committee. Things do not alter so much in the course of a few years—from 1927 to today—but if the right hon. Gentleman is not prepared to accept that, may I invite him to bear with me while we go into a board room and decide what happens when we are told that the Profits Tax has been increased, as far as distributed profits are concerned, to the extent of 5 per cent. less Income Tax, meaning approximately 2¾ per cent.—namely, 7d. in the £. Let us know what we are discussing. We are discussing the enormous burden of 7d. in the £ and we are at a board meeting trying to decide how we shall calculate our costs and selling prices so as to take this into account.
I do not know whether anybody has ever tried to work out beforehand, at the start of the year—when prices are being fixed for a vast variety of articles which may be sold during the year—the different sorts of conditions which have to be accurately estimated, the different world and trade conditions which have to be estimated, and the different sorts of expenses—some of which march proportionately with your sales and some of which march disproportionately with your sales—which have to be considered in order to determine what your likely profit will be. You have to determine what your Income Tax computation is going to be—which is a pretty complicated thing these days, believe me—and then to try and find out what your wear and tear rates and replacement allowances are going to be, having regard to new plant you have bought and the new Finance Act which the right hon. and learned Gentleman introduced; and then to decide a year in advance what your distribution policy will be so that, having decided how much money is going to be made, you can decide how much is to be left in reserve and how much distributed to the various classes of shareholders.
If anybody has ever tried to do that, he will agree with me that it is an absolute impossibility. What is suggested, then, by the right hon. Gentleman is that not only can that be done but that it can be done to such an accuracy that the answers can be defined in terms of 7d. in the £.

Mr. Nicholson: The hon. Member speaks of 7d. in the £. Is that not a miscalculation? He speaks of it as if the tax were on distributed profits. Is not that quite wrong? The added burden of Profits Tax does not fall on dividends but on what is put to reserve, and whether that is 7d. in the £ or 7s. in the £ surely depends entirely on what proportion of profits one distributes.

Mr. Diamond: The hon. Member and his right hon. Friend before him make this simple matter much more confused by trying to talk of where, exactly, the Profits Tax falls. We all understand that profits are the difference between what you take and what you pay out in expenses. You have a sum left, a pool if you like, and the Chancellor of the Exchequer comes along and dips into that pool to a certain

extent—to an ever-increasing extent it appears but, at any rate, to a certain extent. After he has dipped in there is a sum of money left. That is either poured out to the shareholders or left where it is. In those terms, I should have thought my arithmetic was fairly correct. I hope I am correct, but I may be wrong. I see the hon. Member for Farnham shakes his head; apparently he says my arithmetic is quite wrong. Well, then, we will go over it again and the hon. Gentleman will tell me where my arithmetic is wrong.
We intend to increase the Profits Tax on distributed profits by 5 per cent., according to this Bill. Income Tax is 9s. in the £, which is 45 per cent. Now 45 per cent. of 5 per cent. leaves 2¾ per cent. That is right. Now, 2¾ per cent. is approximately, though not exactly, 7d. in the £. That is right, and I am glad to see that the hon. Member for Farnham agrees. We are talking about a tax which means 7d. in the £, and I am following on the right hon. Gentleman's submission that this tax will enter into costs and prices and that the managing director and his board will have regard to this vicious tax, this tremendous burden which is being placed on the country, in fixing prices.
Let us consider an ordinary case. I do not want to argue this in terms of economics, which I do not understand; I simply understand it in ordinary terms of pounds, shillings and pence. Let us consider an ordinary case of a company which makes an average of 2 per cent. in profit on its turnover—that is, its average net profit on its turnover. If we take that 2 per cent. of the turnover we have to consider what effect the Profits Tax will have on the turnover, and we have already decided that this Profits Tax is 2¾ per cent. We have to take that figure of 2¾ per cent., and I am glad that the hon. Member for Farnham is listening so attentively. He will be able to correct my figures.

Mr. Nicholson: rose—

Mr. Diamond: The hon. Member will, no doubt, have an opportunity of making his corrections heard. We have to take that figure, and I thought it might be useful if we took it in terms of motor cars, which are things we export, and if we took an average motor car at £500. If we


are exporting motor cars at £500 and we are told we are to have an increased Profits Tax on those cars we find that instead of selling a motor car at £500 we have to sell a motor car for the much increased price of £500 0s. 5d.

Mr. Assheton: How did the hon. Gentleman work that out?

Mr. Diamond: If the right hon. Gentleman is asking that seriously I will of course answer him, but if he is not asking that seriously and merely wants advice I suggest that he comes round to my office and pays the usual fee. If I may address my remarks to my Member of Parliament—although, without disclosing any secrets of the ballot box, I may say I have never voted for him so far—but if I may address my remarks to the right hon. Member for the City of London (Mr. Assheton), I will tell him that this is an average case, that one makes 2 per cent. on one's turnover in net profit.
Now the Profits Tax, which is being increased by 5 per cent. less Income Tax, amounts to 2¾ per cent. of the net profit. So we have to take 2¾ per cent. of 2 per cent. of the turnover, which is approximately five-hundredths of 1 per cent. (Laughter.) These figures cause mirth, but so far as I know they are just exactly right. I am just discussing these average figures. They are obviously right, because if we take them over the whole field of industry, the total yield in a full year is £13 million. It cannot even be called chicken feed. It would not feed all the chickens we have got.

Mr. I. J. Pitman: May I ask the hon. Gentleman two questions which I think may be helpful? First, who has suggested that tax, whether Income Tax or Profits Tax, enters into prices? Secondly, does he not agree that the capital structure of companies varies enormously, and that what he is making is an assumption that the capital is all in deferred shares? The whole of his arithmatic breaks down on the supposition, which is a fact, that companies vary in their capital structure. Some have debentures, some notes, some have preference shares, some preferred ordinary shares and some deferred shares. I think that my right hon. Friend's point is that the whole of that tax falls on the deferred shares, although the distribution has been to the other shares.

Mr. Diamond: I am only too delighted to answer both questions. The person who was suggesting that tax, Profits Tax or Income Tax affects prices—surprising as the suggestion is to himself, whose knowledge of the City, the Bank of England and industry we all respect—was, of course, the right hon. Member for the Scottish Universities (Sir J. Anderson); and the right hon. Member for Saffron Walden was saying it, too, today. I am only sorry that the hon. Member for Bath apparently was not in his place to hear him.

Mr. Pitman: I have been here all the time.

Mr. Diamond: I am sorry the hon. Gentleman was not paying attention to his own leader.

Mr. Assheton: May I interrupt the hon. Gentleman?

Mr. Diamond: May I answer the second question first?

Mr. Assheton: Of course.

Mr. Diamond: The second point put to me—and I hope the hon. Gentleman will bear with me while I give the answer—was that, of course, companies have different capital structures. It was because of that reason that I took the worst possible effect, and assumed that the whole of the distribution and the whole of the interest paid out was in such a form that it would be subject to Profits Tax; because, as we know, there are many cases where capital does not receive remuneration which attracts Profits Tax at all.

Mr. David Eccles: I am fascinated by the arithmetic. If I heard the hon. Gentleman aright, he says that 2¾ per cent. tax is equivalent to 5d. a motor car on the turnover. Therefore. I suppose that 40 times that—I cannot do the arithmetic at the second—is about 200 pence, or a little less. Is he really saying that the whole profit on the motor car would be less than £1? It is very interesting if that is so.

Mr. Diamond: It is a reasonable case—

Hon. Members: No.

Mr. Eccles: Is it true that the profit on a motor car is less than £1?

Mr. Diamond: Of course it is not. If the hon. Gentleman will allow me I shall tell him why it is not. Nobody said it was, so far as I know. I am saying that in the normal case—to take an average case—the company makes 2 per cent. profit on its turnover. There is nobody here who would say that that was absolutely abnormal. It is the perfectly normal case, as any practising accountant knows. I have taken what I regard as an average case, neither very high nor very low. If a company turns over its capital five times it makes 10 per cent.

Mr. Eccles: What is the profit on a motor car?

Mr. Diamond: Two per cent.

Mr. Eccles: Really.

Mr. Diamond: Two per cent. of the turnover. If the company makes motor cars, the 2 per cent. is on the motor cars. If the company makes motor cars and sells them at £500, its profit is £10 on that motor car—net profit.

Mr. Eccles: Getting nearer.

Mr. Diamond: The hon. Gentleman says it is getting nearer. I had thought he was as capable of working out twice five as I am. I have tried—and I hope I have succeeded at last—to make as simple and as clear as I can what we are really discussing against the background of a very serious situation, regarded by the Opposition as even more serious than we ourselves regard it—at any rate, in their speeches. I am trying to make it clear against the background of that very serious situation. The suggestion is made that this tax is going to do a number of terrible things, which the right hon. Gentleman put forward. I will give way to the right hon. Member for the City of London once more if he wishes, but I should like to make my speech sometime today.
Those are the main arguments which the right hon. Gentleman puts forward. First of all, he says it enters into costs and, therefore, prices. I hope I have satisfied him it does not do so. No mathematician or anybody else is capable of working it out with such accuracy that the increase in profits will come to something like 2¾ per cent. Secondly, he suggests that it amounts to reducing

reserves. That does not follow at all, unless the right hon. Gentleman is going to say that, in spite of the position in which we all find ourselves, in spite of the inflationary situation which he and his supporters say exists, in spite of the need for saving and cuts and reduced expenditure which he says exists, he is going to lead all industrialists into the course of conduct by which in no circumstances are dividends reduced—in no circumstances.
What he is saying is that where we are faced with the possible alternatives of reducing reserves or reducing dividends, then in all circumstances let us reduce reserves but keep up dividends. That, he says, is the official Conservative Party contribution to our policy of disinflation.

Mr. R. A. Butler: The hon. Gentleman knows perfectly well that I said no such thing. I took care to announce the number of companies that have reduced dividends, and the percentage; and I said that, whether we like it or not, it is quite likely to work out as I said. Those were my words. I should like to take this opportunity of telling the hon. Gentleman that, unfortunately, I have an absolutely vital engagement which will take me away in 10 minutes, but that I shall return, and that no discourtesy is intended by my going away.

Mr. Diamond: Nobody will ever accuse the right hon. Gentleman of discourtesy. In point of fact, what he said was, and what he has just now repeated was, that he, who is leading the Opposition on this Bill, and who holds a most important and responsible position, and who is looked up to by many people on all sides in the country, and who still has the dignity and responsibility which would have been due to anybody who brought in the Butler Act—what he was saying in his position today was, that he expects industry will do so and so; and I say that that is an invitation to industry to do so and so.
Why did he not get up and say, "We on this side realise that this is a mere token. It is not going to affect anybody's profits to a measurable extent. It is not going to affect anybody's dividend interests to a measurable extent. This is going to be a very moderate contribution to the solution of the situation in which we all find ourselves, and I, therefore,


appeal to all industrialists, whenever they find themselves in the position of having either to reduce reserves or to reduce dividends, to reduce dividends and to maintain their reserves."?
The right hon. Gentleman went on to refer to the disincentive effect of this tax. I should have thought that the figures which I have given with some difficulty to all hon. Members in this House would have satisfied them that this cannot possibly be considered in that way. I should have thought that nobody in this House, with the responsibility which attaches to every Member of Parliament to his constituency, if to no one else, would have said that without taking into account the whole of the context in which this Bill arises.
There was an occasion when the Prime Minister came before this House and introduced his White Paper on personal incomes. That was not a popular document with the supporters on this side of the House. I discharged the responsibility which I regard myself as holding by going down to my constituency within 48 hours of the publication of that White Paper, and addressing a meeting, mainly of my own supporters, wage earners, people who expected that the Labour Government would be able to provide them with continual increases in money income and did not fully understand the difference between money income and real income. I made a speech asking for their support of the White Paper. No doubt many other Members did the same.
I regarded that White Paper as of extreme importance. How many hon. Members opposite have been or are going to their constituencies to address Chambers of Commerce, their friends and clubs, all of whom have great influence in these matters, to appeal to them that, in these circumstances, they should all do one thing—restrict dividends so far as reasonable having regard to the need of the nation. Is not that a responsibility which every one of us, who each represents some 100,000 souls, might discharge?

Mr. Pitman: I am one of those who tried to make such a speech at the time of the White Paper. I offered to speak to the local trades council, and they

refused. They would not have my support of the Chancellor of the Exchequer. In this particular case, the hon. Gentleman is urging us to do something which has already happened.

Mr. Diamond: If the hon. Gentleman would permit me to say so, he brings with him certain qualities and the knowledge that he is speaking as an ex-Director of the Bank of England. I am suggesting that if he would talk to a number of company directors—never mind the people affected by restrictions on wages—and address the Chamber of Commerce in his own constituency on those lines, and, in particular, if he would be good enough to support us in the Division Lobby tonight, he would be doing a good thing.

Mr. Pitman: I maintain the policy of not increasing dividends.

Sir P. Bennett: I said in the Debate on devaluation that the suggestion to freeze dividends did not come from the Chancellor of the Exchequer. It was my suggestion made to British industry, and I was given the job of carrying it through. I got agreement and we gave the Chancellor of the Exchequer a voluntary undertaking. What we are being asked to do today has already been done.

Mr. Diamond: I have always regarded the hon. Gentleman and the hon. Member for Bath (Mr. Pitman) as among the best leaders of industry in this country, and I am delighted that they have seen their responsibility in this way.

Sir P. Bennett: Two years ago.

Mr. Diamond: In all these matters, my right hon. Friend has been most moderate and preferred to rely on voluntary agreements rather than on compulsion and the bringing in of legislation. I am delighted to find that the hon. Member for Edgbaston (Sir P. Bennett) has done this, and I am appealing to him to continue on those lines today, when the country is in a far worse position than it was two years ago. If he was prepared to do this two years ago, I hope that he will be prepared to go forward and urge any company which finds itself faced with the choice of smaller reserves or smaller dividends to plump for smaller dividends.
One can make a speech in the form of consecutive remarks or in answer to interjections, but whichever way one does it the time goes, and as there are other Members who want to speak, I shall curtail my remarks. I can only say that I support this Bill, not because it is a tax which will give any tremendous help in any direction, but because it is a very good opportunity to those who are interested in the welfare of this country, primarily as profit earners, to make their contribution to the welfare of the country, just as those engaged as wage earners are being asked to make their contribution. I say in all seriousness that the Division tonight will not be on the question of whether we are on the side of an increase in Profits Tax, but whether or not we are on the side of England.

5.8 p.m.

Mr. Godfrey Nicholson: In the matter of courtesy, I should like to model myself on the hon. Member for Blackley (Mr. Diamond). The hon. Gentleman reckoned this additional tax at 7d. in the pound on net profits. I am sorry that he, as an accountant, should have so misunderstood the position. The incidence of this tax depends on how much of the profits of a company are distributed. It does not fall on the profits that are distributed but on the profits that are not distributed, and therefore falls entirely on reserves. That is a plain fact which the Institute of Chartered Accountants could tell him. There is no means of recouping this tax from distributed dividends. It is paid from what is left before the dividends are distributed.

Mr. Diamond: If the distributed profits were less by the amount of the profits tax there would be no tax to fall on the dividends at all.

Mr. Nicholson: I would take a typical example of a company which distributes three-quarters of its profits in dividends. According to my reckoning, it is an addition of 8¼ per cent. on what should be put to reserve. In this particular case, nothing whatever can be put to reserve. It is quite fallacious to reckon that it is a proportion of net profit. The whole thing depends on how much is distributed and how much is put to reserve. It has been said: "All right then, put less into distributed profits and more into reserve."

For example, if no dividend is paid at all, 50.5 per cent. of profits go to the Government. If two-thirds is distributed in the form of dividends, the amount put to reserve is only 16½ per cent. of what it was intended to put to reserve.
It is a bad policy to tax what is put to reserve and at the same time to urge a reduction in dividends. At this time, above all, industry—upon which the whole country is dependent for its livelihood—needs more reserves. Prices are rising and the costs of replacement are rising, and more capital is needed to go on running industry. Either more money must be placed to reserve or more capital must be raised.

Mr. Diamond: Or dividends must be reduced.

Mr. Nicholson: No, I am not talking about that. I am saying that either firms must be able to place more money to reserve—it does not matter how it is done—or they must raise more capital. They must get more money into their business. I am sure the hon. Gentleman would agree with that. If the dividends are reduced, then pro tanto that makes it more difficult to raise fresh capital. The Government may take one of two courses, but not both. If they prevent more money being put to reserve they should encourage the inflow of more capital; if they encourage companies to reduce dividends they should allow companies to put to reserve what they do not pay in dividends.
The burden of taxation in this country today is such that practically no more money can be put to reserve at a time when more capital in industry is necessary. The argument we on this side have advanced, and will continue to advance, is against this additional tax. We are not blaming this tax alone, but the whole tax burden on industry. We say it is a fatal mistake to increase the tax burden on industry; it should be reduced if commerce and trade is to live in this country. It is in the interests of all, from the poorest to the richest, that industry in this country should flourish—with which I am sure every hon. Member opposite agrees—and to flourish, industry needs more capital: either let it raise more capital or let it put money to reserve. That is the whole thing in a nutshell.

5.12 p.m.

Mr. Jenkins: I am not sure whether it is desirable to continue this long arithmetical argument which the hon. Member for Farnham (Mr. Nicholson) has been having with my hon. Friend the Member for Blackley (Mr. Diamond), except to say I should have thought it was perfectly clear—and it has been made clear time and time again by my hon. Friend—that if a company faced with this extra imposition decided to reduce its distributed dividends by the amount of the imposition, the company would be able to put exactly the same amount of money to reserve after the tax as it was able to do before.

Mr. Nicholson: I cannot go into the arithmetic now; we have not the time. If the hon. Gentleman would consult any good accountant he would find that it is not quite so simple as that. For instance, say a company decided to reduce its distributed dividends from three-quarters of its profits to two-thirds of its profits, so that having £40,000 profit it decides not to pay £30,000 in dividends but only two-thirds, it will then find that it can put only an extra £1,600 to reserve. Profits Tax is not calculated in the way the hon. Gentleman seems to think. I shall leave it there. I have had my say, and I do not want to keep on intervening.

Mr. Jenkins: I am afraid I must confess that I did not altogether follow that interruption. So far as the beginning of it was concerned, when the hon. Gentleman invited me to consult any accountant who he said would bear him out—

Mr. Nicholson: Any good accountant.

Mr. Jenkins: —I am sure that if I consulted my hon. Friend the Member for Blackley, who is an accountant, he would not bear out what the hon. Gentleman says. I shall return a little later to another point made by the hon. Gentleman.
I want first to refer to a point made by the right hon. Member for Saffron Walden (Mr. R. A. Butler), who I am sorry has not yet returned. He opened his speech by saying the party opposite took the view that in our present difficulties all must share alike, and that we must try to get equal sacrifice. But as he devoted the rest of his speech to proving that, for various reasons, it was

quite impossible for the profit earner to make any contribution to this sharing alike, I think we must regard that sentiment as being rather academic. He went on to refer to this tax as being a fine on successful exporters to dollar areas. That is a point I want to deal with a little later in my speech.
Let me now return to the hon. Member for Farnham, who took up an attitude which many critics of Government taxation policy on that side of the House have frequently taken up in the past: namely, of regarding this tax as the last blow in a desperate warfare against the ability of companies to put money to reserve which the Government have been conducting for a very long time. There is not the slightest factual basis for this theory. The sums which companies are able to put to reserve depend, broadly speaking, on three factors. First, there is the total amount of profits they are able to earn, which I think most people would agree have been very high in recent years. Secondly, there are the dividend policies which the companies as a whole are pursuing; and again I think most hon. Members would agree that at any rate the Government have been doing their best to keep down dividend distribution. Thirdly, there are the rates of tax prevalent at any particular time.
It is on all three of those factors, and not merely on the last factor—as hon. Members opposite continually try to pretend—that the amounts of money which are able to be put to reserve depend. Whereas the last factor may have militated slightly against the building up of reserves, the first two factors, and particularly the first, have worked very strongly indeed in the other direction. As a result, additions to the free reserves of companies—and these are figures after tax—

Mr. Nicholson: After Profits Tax.

Mr. Jenkins: After Profits Tax, and after Income Tax. In 1938 they amounted to £170 million, or 3.7 per cent. of the national income, and in 1948 they amounted to £545 million, or 5.6 per cent. of a very much larger national income. Put another way, they increased by 220 per cent. during those ten years—and this was during a decade in which, according to the United Nations' Economic Commission for Europe, the average increase


in the price of all goods entering into the formation of fixed capital went up by no more than 120 per cent.

Mr. Nicholson: I apologise for intervening again, but I would point out that those figures were calculated before the introduction of this Profits Tax.

Mr. Jenkins: Of course they were. I am dealing with 1948 because I am trying, as a background to this discussion, to deal with the theory which the hon. Gentleman himself admitted he held, that this was the final blow in the long warfare against the ability of companies to build up reserves. My hon. Friend the Member for Blackley has shown very clearly the quantitative importance of this tax, and I am just seeing what is the situation against which we have to consider that tax, with its very small quantitative importance indeed.
When interrupted I was just making the point that it is quite clear that the amount put to fresh reserves in 1948 had increased over 1938 by a sum far greater than that by which the cost of capital goods had gone up during that period. Hon. Members opposite may reply that this is not an entirely valid point because depreciation allowances are inadequate. I rather doubt the validity of that objection. Provision for depreciation had increased in 1948 by 130 per cent. over 1938—an increase which exceeds, as my previous figure show, the increase in the price of capital goods during that period. I do not want to argue it one way or the other, but I think it just possible that depreciation allowances were inadequate in 1948 and equally inadequate in 1938. Even if that is the case, it does not really enter into the comparison between the amounts which were put to free reserve during the two years.
Therefore it is important that we should realise that we are discussing this issue of an increase in the Profits Tax against the background of a rate of company saving which has been very much greater than during the years when hon. Members opposite were responsible for control of the country's affairs. This cannot possibly be considered as the last blow in a warfare against company savings such as hon. Members opposite wish to depict it as being.
The second point I want to make is one which was touched on and to some extent dealt with by my hon. Friend the Economic Secretary in his speech in opening the Debate. It is the odd contradiction which there appears to be between the attitude of hon. Members opposite to increases in the rate of tax on profits and increases in the rates of interest. This came out most clearly in the speech of the right hon. Member for the Scottish Universities (Sir J. Anderson) last week, when he made a point, which was a quite good and valid point so far as it went, that high rates of taxation did to some extent discourage new investment.
I do not for a moment think that I or any other hon. Members on this side would disagree with him on that particular narrow point, except to say that here again he is falling into the error, shared by some of his hon. Friends in the past, of taking in account only one factor in a situation and ignoring the fact that while rates of tax may have gone up in contrast with the pre-war period rates of profitability have also greatly increased since then. Nevertheless, in a given situation I think we would admit that a high rate of tax does have a weeding out effect on capital investment projects and make unprofitable some which might otherwise be regarded as profitable.
But what I completely fail to under stand is how the right hon. Gentleman, and others of his hon. Friends who no doubt take up exactly the same point of view, can reconcile that with the demand he made about two minutes later in his speech, a demand one often hears from the benches opposite, for a stiffening in the rates of interest, because the two things have almost exactly the same weeding out effect upon new capital enterprises.

Mr. Eccles: Surely the hon. Member will distinguish between those who save and those who invest. Those who save are discouraged by high taxation, because it leaves them a smaller margin out of which to accumulate new capital. The interest rate, on the other hand, is the best weeder out of those who are going to invest the savings made by someone else. There are two sets of people in two different cases.

Mr. Jenkins: Normally in considering this question I would agree that there is


the point of view of the saver and that of the investor, but the right hon. Member for the Scottish Universities—I am sorry he is not here now—showed in his speech last week that he was not in this particular case thinking about incentives to saving but was talking about the disadvantages of high rates of taxation in so far as they discourage new capital investment on the part of the entrepreneur when deciding whether to undertake some project.
He went on then, within the space of one column of HANSARD, to make the point that he wanted a stiffening of the rates of interest—I think a more intelligent use of rates of interest was what he said—but there was no doubt that he wanted to use the rate of interest far more than it had been used in the past in order to weed out certain capital investment projects. I cannot understand what, from this point of view, is the distinction between the two methods. They really do have almost exactly the same weeding out effect.
Indeed, one can measure them against each other statistically, and say that on the assumption, which is an unfavourable assumption from our point of view, that the investor was interested only in a fully distributed return, this increase of 5 per cent. in the Profits Tax would have the same discouraging effect on new investment as would a rise in the rate of interest of 17 per cent.

Mr. Molson: A rise in the interest rates discourages those investments which are not going to bring in a large return. An increase in the Profits Tax is singling out and penalising those concerns which are showing themselves to be the most profitable and which are of most advantage to the country.

Mr. Jenkins: In replying to some of these interruptions I am afraid that I am going to be diverted into devoting rather more time to certain points than I had intended, but I must say that I cannot accept the point of the hon. Member for The High Peak (Mr. Molson) at all.
Consider the situation in which someone proposes to make an investment of £10,000—this a hypothetical case—and decides that he wants a return of £100 over and above what he will have to pay in taxation and over and above what

he will have to pay in servicing the loan. Let us assume a rate of interest of 4 per cent. Supposing he wants £100 clear to make the investment worth the risk, he would have to calculate that the return would give him, I think, £642 a year, that is, with rates of tax as they were before the introduction of this Bill. After the introduction of this Bill he would have to get a return of £659 in order to make it worth his while.
That, I say, would be exactly the same as putting up the rate of interest to 4.17 per cent. from 4 per cent. Leaving the taxation structure unaltered and altering instead the rate of interest by this amount he would need the same extra return in order to make it worth his while to go on. We have a position in which there are two sets of circumstances which can have similar effects on the willingness of people to invest, and yet the one policy is regarded as absolute anathema by hon. Members opposite and the other is regarded as highly desirable. Really, one is forced to the conclusion that it is not so much the effect on enterprise that they are worried about as the fact that a high rate of interest greatly benefits the rentier class, whereas high rates of taxation do not, and that that is the important distinction.
Another point of which we have heard a good deal—certainly the hon. Member for Edgbaston (Sir P. Bennett) interrupted to make it in a very impassioned way—is that profit earners, by virtue of the good response which they have made to appeals for dividends limitations, should have secured themselves absolutely against further imposts of this sort.

Sir P. Bennett: I never said anything of the sort.

Mr. Jenkins: I thought that was the implication of the hon. Member's remarks. If it was not, I am not sure what was the implication.

Sir P. Bennett: We had been asked not to be selfish but to go round the country and publicise the necessity for keeping up the good work, and I gave the answer that for two years we had been doing so.

Mr. Jenkins: Certainly the right hon. Member for Saffron Walden (Mr. R. A. Butler) did make the point of how


well dividend limitation had been observed, and I admit that it has been well observed, but clearly the only point of making that remark in a Debate concerned with Profits Tax is to suggest that the good response to dividend limitation should have excused profit earners from an impost of this sort. There has also, of course, been a quite good response from wage earners to this demand for restraint. Yet that has not prevented wage earners from having to endure several small but necessary sacrifices during the past few weeks.
Furthermore it is quite fallacious to suggest that there can ever be real equality of sacrifice between wage restraint and dividend restraint. First, for the very obvious reason that, broadly speaking, the dividend drawer has so much more to start with; second, for the rather less obvious reason that when a wage demand is forgone for one year or two years it is forgone for ever. There is no question of payment, when the future increase does come along, being dated back to the time when restraint was exercised. But the dividend drawer who forgoes his dividend increase over a period of years does not forgo his return for ever. The money is ploughed back into the business; it is there, enriching his capital, and will give to him either the prospect of increased income in the future or the possibility of a capital gain.
I think this is a very important disparity indeed between the sacrifices which the two sides are making in this matter. It is a disparity which, I think, should be corrected at not too distant a future by a substantial capital tax of some sort. This is not the occasion on which to argue that in detail, but I think it is pertinent today to point out the fallacy of the suggestion that dividend drawers, by virtue of exercising a policy of restraint, have purchased complete immunity for the future against any further impositon of taxes.

Mr. Osborne: When the hon. Gentleman says "capital tax" does he mean a capital levy?

Mr. Jenkins: I do not think that is relevant to this discussion.

Mr. Osborne: I asked the hon. Gentleman what he meant.

Mr. Jenkins: I meant a capital levy of some sort.
My next point concerns the suggestion made explicitly by the right hon. Member for Saffron Walden that this increased tax is by way of being a fine on successful exporters to dollar markets. I do not believe it is anything of the sort. One of the undesirable effects of devaluation, which I think we all recognise, is that it will inevitably make us as a nation somewhat poorer than we were before. We shall suffer a small reduction in the overall standard of living. It may be a short-term reduction but, none the less, it will be a reduction. At the same time, it will substantially increase the profits of those, or most of those, at any rate, who are selling in North American markets and it will, I believe, lead to a general shift to profit over the whole industrial and commercial field.
I certainly agree that a little extra profit for a successful dollar exporter is a good and desirable thing in itself. It exerts a pull in the right direction, but we have to ask at whose expense will come this extra profit? I say that the extra profit should come not at the expense of the rest of the community as a whole but at the expense of other profit earners who are not doing anything very much in the dollar markets. I think it is this design which this tax will help to put into operation. If the Opposition reject this view what do they say? They are saying, in effect: "We think that in our present difficult situation the standard of living has to come down to a small extent, but that within this overall reduction there must be more for those who have most and still less for those who have least."

Mr. Osborne: Who said that?

Mr. Jenkins: I did not suggest that this was a quotation. I was saying that the Opposition say that there must be greater profit for dollar exporters, and that it must not come out of the profits of other manufacturers and industrialists. If that does not happen then the increased profit must be at the expense of the community as a whole, wage earners and people of that sort. That is an intolerable policy to put forward at this moment; it is a policy of narrow selfishness and a policy on which the Opposition cannot hope to unite the country.

5.36 p.m.

Sir. Ralph Glyn: I think it is a tragedy that motives have been imputed in this Debate, at a time when the country is in a most serious position. I am intimately connected with industry, and I have always hoped that the House would give a lead to help managements and executives and leaders of the trade union movement, who are doing a wonderful job, so that we all might get out of this difficult situation. So far as the Debate has gone, I have not yet heard one word which will help that effort. The Economic Secretary to the Treasury made a political speech.
I want to say, right away, that I do not feel it will be easy for me tonight to vote with my party—although I shall not vote the other way—for this reason: I have daily contacts with workers in industry, and I know that there is in their minds, as has been reflected in several speeches in this House, the distinct feeling that we are trying to get more out of the workers than the investing public are willing to contribute.
I do not believe that to be true, but I am quite convinced that in industry generally—I am thinking particularly of the engineering industry, and the shipbuilding industry, which will go through a very difficult time—the time has come when everybody must show his willingness to do something to help the country out of a situation which, I believe, some hon. Members of the House do not realise to be as serious as it it. We shall not get out of our present troubles by carrying on political arguments in the House, when it is the opinion of many people outside, that we must get together and find a solution of our problems.
I have been in the House for a great many years, and I can assure hon. Members that the situation in industry is most difficult. One of the problems we are up against, I believe, is that of persuading the leaders of trade unions that we are behind them, and not trying to trick them in any way. The other day a speech was made by the hon. Member for Cannock (Miss Lee) which, I thought, was a remarkably good speech. She pointed out how very uneven were certain firms in different industries. That is undoubtedly true.
One of the things which must be understood not only by the Treasury but

by the workers is that if we do not produce more modern machinery and more labour-aiding machinery we shall never compete satisfactorily with our competitors. Concerns with which I am associated are putting money to reserve and putting all of it into modern machinery. It will be more difficult to do it with these increased taxes, but it can be done in a well-managed business. What is even more important than any of these things is to tell the leaders of the workers in one's firm what one is doing and why one is doing it. We lose nothing by doing that. The trouble of nationalised industries is that under the present scheme of things the workers are not as close to the management as they ought to be. Private enterprise is succeeding because the more enlightened firms recognise that it is necessary to bring the workers into all this.
Therefore this Profits Tax has to be explained to the workers to show that the investors are making a sacrifice. I believe that the tax can be justified at the present time. I should not like to go to the workers and ask them to do something more unless we were also doing something more. That is the way I look at it. I do not look at it from any other angle. Someone may point out that the amount is only £13 million, a token, but it is a very useful token at the present time if one has to tell one's people that one wants them to work longer hours with more fixed rates of wages than before. I do not believe that the great body of shareholders of operating companies will resent this in the very least if the companies are well-managed. It all turns on the extent to which the companies are well-managed.

Mr. R. A. Butler: This is a serious question. Will the hon. Baronet say, from his experience, the extent to which he thinks this is likely to fall directly on the shareholders? It would be of interest to hear his expert opinion.

Sir R. Glyn: My view is that any extra burden which we are imposing by taxation is bound for the time being to reduce the money which the shareholders will eventually, get. But an enlightened management must continue to improve machinery and equipment. The time will come, however, when the shareholders will get the benefit of the improved machinery.
I do not know whether it is realised by hon. Members that 85 per cent. of some industries in this country is entirely absorbed by the movement of material. If we can improve the machinery and cut that down we shall provide bigger wages for the workers and more profits for the shareholders, but we must have the assistance of the trade unions in this—in recognising that American methods on these lines are better. We improve our standard of living in proportion as we improve the mechanism of our industry. Nobody can deny that, and, if that is so and the United States have twice the level of the standard of living that our workers have, it is grossly unfair to our people. It is absolutely essential that we should take not only the leaders of the trade unions but the workers into consultation.
I should be out of Order if I mentioned what I consider to be a very constructive effort by the T.U.C. to help us in our difficulties, and I fully recognise how hard it is to get rid of their differential rates because I realise that the skill of the workers should be rewarded, not only by wages but by giving them the best machinery possible to handle; and we are not doing that. The problem today is a psychological matter, and at the moment I am only speaking from that point of view. It is a mistake at the moment to allow the workers to think that the capitalist side of industry is not making further sacrifices when they themselves are asked by their leaders to make sacrifices. Therein lies my difficulty, and that is why I wished to speak.
I beg the House to realise that it will do no good to carry on party warfare for party purposes at a time when our standard of living is at stake, when Marshall Aid is not as popular as it was in the United States, and when we are facing something which may really mean disaster. If we are using the excuse of the proposal for this £13 million increase to destroy confidence in the country between management and trade unions, and the T.U.C. and workers, we are doing a bad day's work. It is our business in this House to give a lead, and the lead we ought to give is willingness to accept a sacrifice if we think it will not do permanent harm.
Frankly, I do not believe that this small tax will do permanent harm; I believe

it will do immeasurable good if it can be shown that a contribution is being made by both sides at a time of crisis when all must bend themselves not to making party points but to helping the country and especially industry, to recover its position which is so seriously assailed at the present time.

5.46 p.m.

Mr. Sparks: I am very glad to have the privilege and opportunity of following the hon. Baronet the Member for Abingdon (Sir R. Glyn). I have had a lifetime of experience in the trade union movement, and particularly in the railway transport organisation with which the hon. Baronet is very familiar, and I can say that the words he has spoken this afternoon very accurately sum up the need of the moment in industry.
I am surprised that the Opposition should have made such a mountain out of a molehill over this small Bill because I believe that, far from achieving what they hoped to achieve by their opposition to the Bill, they are very substantially accentuating the differences and suspicions which exist in industry and are really a lay-over from the bad old days between the two wars. It is vital that if the workers are to be asked to restrain their demands for wage increases—if from no other point of view than the psychological—the workers should be shown that the owners of industry are also ready to stand their corner and do their share. The Bill will have a tremendous psychological value in industry and will help to create the spirit of teamwork and co-operation which we must have if we are to see the country through its present difficulties.
I rose to deal with one or two matters arising chiefly from the speech of the right hon. Member for Saffron Walden (Mr. R. A. Butler). The right hon. Gentleman laid great stress on the adverse effects which he thought the Bill would have upon the export trade and said that it was vital that exports should increase and essential to give encouragement to exporters but that the Bill was a smack in the face. I have been at some pains the last day or two to find a justification for the view held by the Opposition that increasing taxation is a disincentive to industry, particularly in regard to the export trade. In making my inquiry into this side of the problem I have taken


the period during which the party opposite were in power between the wars when, I assume, they were completely free to bring into existence the fundamental belief which they have that the lower the rate of taxation is the greater will be production and particularly exports.
In the period from 1920 to 1938, the standard rate of Income Tax dropped from 6s. to 4s. in the £—in 1925. For five years it remained there. It steadily rose to 5s. in the £ in 1938, but there was no visible stimulus in our export trade. Through the whole of that period that trade continued to shrink substantially. Our exports in 1920, including re-exports, were £1,557 million, and they fell to £533 million in 1938. There was a substantial reduction to about one-third in money value. The deficit of our visible balance of trade remained throughout the whole period around the same level. It was £376 million in 1920 and £387 million in 1938.
Income Tax was substantially reduced during that period. The net profits of industrial companies, excluding interest on debentures, rose from £134 million to £303 million. The gross income of the Income Tax paying section of the community rose from £2,912 million in 1924 to £3,990 million in 1938, roughly an increase of £1,000 million. The number of Super-tax payers increased in the same period from 93,000 to 102,000. What was the effect of that great financial and monetary incentive on our export trade? Our export trade considerably and substantially declined. As a matter of fact, the great core of unemployment during that period was to be found in the export trade.
For instance, coal, including bunkers, dropped from 79 million tons in 1924 to 46 million tons in 1938. Pottery, which is also a basic industry, fell from 873,000 tons to 462,000 tons; iron and steel, of which we hear so much, fell from 3,812,000 tons to 1,913,000 tons; cotton yarn fell from 72,767 to 55,793 thousand tons; cotton manufactures fell from 376,529 tons to 134,578 tons. Woollen and worsted manufactures were also substantially down, while linen piece goods came down from 110 million square yards to 52 million square yards. Obviously I have not time to expand that

list, but it could be very substantially expanded.

Mr. Deputy-Speaker (Mr. Bowles): The Measure before us deals with an increase in the Profits Tax. The hon. Member must not overburden his argument with quite so much detail as he has been using.

Mr. Sparks: I was trying to reply to the right hon. Member for Saffron Walden, who contended that by mitigating taxation, we should increase our export trade, and he argued that the Bill would tend to diminish rather than to increase incentives towards export. I am trying to answer that argument by pointing out that the principle he advocates was not in evidence during the inter-war period.

Mr. Deputy-Speaker: The hon. Member at first gave total figures which were quite relevant, but then he went into too much detail at a later stage.

Mr. Sparks: I apologise for going too much into detail but I wanted to be convincing in what I said. My statements may be checked with the statistical abstracts in the Library. I want to know from the Opposition if they can advance to us any concrete evidence in support of their theory that increase of taxation is detrimental to the export trade, or, in other words, that to reduce taxation will increase our export trade. As a matter of fact, that principle just did not work at all during the whole of the period of time which I have been examining.

Mr. Assheton: I do not quite see that the hon. Member has made a full argument until he can show what would have happened if taxation had been higher.

Mr. Sparks: As a matter of fact, exports were highest when the rate of taxation had been higher. I know that the purchasing value of the pound is very much lower now than it was then, but if we take our standard Income Tax of 9s. in the pound today and compare it with the present purchasing power of the pound, and then compare that with the Income Tax rate between the wars and the purchasing power of the pound then, the right hon. Gentleman will find that there is very little difference between the two standard rates. The fact remains that everything was in the hands of hon. Gentlemen opposite and that if there was


anything in their theory that lower standards of taxation are an incentive to the export trade we should see it. As a matter of fact, that just was not true then, and I do not think it will be true in the future.
I do not think that the Opposition are doing all that they can to create a better feeling in industry. What the Economic Secretary to the Treasury said is true. There are far too many Members on the Opposition side, and far too many members in their party, who think that the country is divided into two sections, the bosses and the bossed.

Mr. Osborne: Surely it is the Minister of Health who has been saying that, because he has divided us.

Mr. Sparks: The Minister of Health is not here. I am sure that we can leave him to defend himself.

Mr. Assheton: Where does the hon. Member get the idea that we are not promoting a better feeling in industry?

Mr. Sparks: I shall tell the right hon. Gentleman where I get it from. Here is "Lloyds Bank Review" for October, 1949. It contains an article by Professor Lionel Robbins, C.B., entitled "The Sterling Problem." He says that he has no sympathy with nationalisation, or sympathy with us at all. In a paragraph dealing with production and incentives, and referring to the workers in industry, he says:
The possibility of dismissal has always been held to be an indispensable instrument of discipline in industry, in nationalised concerns"—
I think he is quite wrong here, because a totally different spirit is now at work—
equally with those under private ownership. But, if nothing is lost by losing a job, this sanction ceases its effectiveness.
That view is held very widely by hon. Gentlemen opposite and the party that they represent. The more they follow that line the more disunity and suspicion they create in industry.

Mr. Assheton: May I pursue the interruption I made earlier? I wanted to get the hon. Member to tell us on what basis he places his suggestion that we on this side of the House want to divide the community into two classes. I absolutely deny that. The hon. Member

quotes something from what Professor Lionel Robbins says. I do not know which side he is on, whether on that of the workers or the employers, but it is quite a different point and the hon. Member has not answered my question.

Mr. Sparks: I assume that the right hon. Gentleman will be going into the Lobby to vote against the Bill. If the Opposition are not going to do that, we might have to review our opinions, but he will be going into the Lobby to vote against this Bill, and we know—

Mr. Assheton: But not against the workers.

Mr. Sparks: If the right hon. Gentleman had spent as long a time in industry as an ordinary worker as I have, he would realise there is much more in this than he appreciates at the moment. What we need in industry today as much as anything is wise, intelligent, broadminded leadership. It is all very well to talk about holding the threat of the sack over a workman and starving him into discipline. We want to hear more from the opposite side as to what they intend to do about the bad leadership that is prevalent too often in many private undertakings.

Mr. Gallacher: There are two classes in society.

Mr. Osborne: Is the hon. Gentleman not aware that the National Coal Board in Yorkshire has not only threatened—

Mr. Deputy-Speaker: I think this is getting very much too wide.

Mr. Sparks: I am sorry that a remark of mine has caused the Opposition to become rather excited. I merely quoted something that is prevalent despite the fact that some hon. Members opposite do not subscribe to this view. From my experience I can say that it exists, and this idea of bosses and bossed, and financial incentives only to one section and a whip to the other is not going to get us anywhere.

Mr. Gallacher: It is the Socialists who say that.

Mr. Sparks: I feel that the nearer hon. Gentlemen come to the producers in industry the better it will be, because who produces the wealth of our nation?

Mr. Gallacher: The workers.

Mr. Sparks: The wealth of the nation is produced by the ordinary workers in industry plus the managers and the technicians.

Mr. Assheton: What does the hon. Gentleman think the shareholders were doing when they earned the money they put into those businesses?

Mr. Sparks: I quite agree that it may be that private persons have invested money, but what I am trying to emphasise is the fact that the shareholder as a shareholder has, generally speaking, no physical interest in actual production and the process of industry. Therefore, I feel that it is to the workers, the managers and the technicians we must look for higher production.
I do not believe that the managers and technicians, who are responsible for the organisation of industry, are moved by this tommy rot we have heard this afternoon about a slight increase in the Profits Tax. I believe that the great bulk of our managers and technicians have the interests of this country fully at heart, and I am quite satisfied that it is to them and to the workers and not so much to the shareholders that we have to look in the future to increase production and to put our country back on its feet.
In conclusion, there is one point I should like to emphasise. Hon. Members opposite complain about the heavy incidence of taxation, and, funnily enough, despite the fact that taxation has been heavy in the post-war years, instead of production coming down as it ought to have done in accordance with their theories, it has substantially gone up. We know that production today stands at the figure of 128 as compared with 100 in 1946. Exports are about 150 compared with 100 in 1938. No more than six months ago the right hon. and gallant Member for Gainsborough (Captain Crookshank) said
We agree with the Chancellor when he said that the year 1948 has been one of very great achievement … The second factor of which we must not lose sight is the amazing resilience of private enterprise in this country … In assessing the success of last year which he calls 'a year of great and steady progress' he points out that industrial production as a whole rose by about 12 per cent. above the 1947 level. I accept that statement of fact."—[OFFICIAL REPORT, 7th April, 1949; Vol. 463, c. 2219–20.]

We heard no long moans from him then about the disincentives in industry through high taxation. We have done remarkably well in the post-war years, despite the fairly high level of taxation.
Therefore, I feel that the views advanced from the benches opposite are, as the Economic Secretary said, very highly fallacious. There is no substance at all in them. There is no real evidence from the trend of our export trade in the inter-war years that lower taxation increases exports. I feel that the Opposition are on the wrong track, and I agree entirely with the views expressed by the hon. Member for Abingdon, whom I respect very much for his work in the railway industry. I believe he is truly expressing the great needs in industry today, and the party of hon. Gentlemen opposite would do well to take note of what he has said, because he is on the right lines.

6.8 p.m.

Mr. Heathcoat Amory: The hon. Member for Acton (Mr. Sparks) will forgive me if I do not follow him directly into the investigations into the past which he has made, except to say that I am sure he did not mean to imply that the conditions of world trade and the export trade were even remotely similar in those days to what they are at the present time. I want to make a few remarks as a quite unimportant industrialist, as one who, while he prides himself very much on being a Tory in party politics, tries to leave party politics as far as possible behind at the factory gate.
First, I should like to say a word as an exporter. I very much agree with my right hon. Friend the Member for Saffron Walden (Mr. R. A. Butler) that it really is not as easy to do this switching as planners sometimes imagine. We must not delude ourselves that it is not going to be very difficult to get the volume of dollar trade that we want. There are, of course, several reasons for that, but I will mention only one. Obviously we have only to send goods of the highest quality to those markets. Output of such goods is not unlimited, and the firms who are producing them best are already very fully booked up, mostly with old-established connections.
I wonder whether the Government realise how difficult it is for an exporter to say to an old customer, "Sorry, old


chap, I cannot continue to supply you any longer. I must leave you to my competitors." Do they realise the value that a manufacturer and exporter attaches to his connections? He values them much more than gold in the bank—much more than his machinery and plant, which is much easier to replace. I agree with what the Chancellor of the Exchequer told us the other day, that we have also the job of helping others in the sterling area to cut down their dollar purchases. That makes it very difficult for us to switch our business from existing customers in the sterling area to new customers in other markets.

Mr. Deputy-Speaker: Perhaps the hon. Gentleman will allow me to interrupt. I do not want to appear too strict, but we cannot now have the Economic Debate continued. This Debate must be confined to the Profits Tax proposed increase. If the hon. Gentleman relates his remarks to that from time to time, he will be in Order.

Mr. Amory: I apologise, Mr. Deputy-Speaker, if I wandered too far away; I wanted to deal with the export business in parenthesis. I think the export business is connected with the subject we are discussing on the question of profitability. May I say that I am far from being a defeatist in this matter? I will tell the House one way in which this problem has been tackled by my own firm. We have worked a five-day week in the last few years. Within the last week or two we had a meeting of our works council to decide whether we were working absolutely flat out. The conclusion was reached that as we were working largely for export, for the time being we would work Saturday mornings as well. That decision was supported by the trade union concerned. I feel that the crux of the export business is the re-deployment of our manpower. That is a thing which causes me a good deal of concern.
Now I will turn to something more directly concerned with profits, but which also has a bearing on industrial relations. I am sure every hon. Member will agree that the first thing we have to do is to seek the highest possible degree of efficiency in British industry today. This involves, I believe, acceptance of the principle that competition is a good, if a rough and ready, way of getting that effi

ciency. One reason why in the past we have not agreed as much as we might have done about this matter is that the two sides in industry have tended to guard jealously their own preserves. We have each tended to warn the other chap off. I believe that the blame for this does not belong to one side but should be shared.

Mr. Deputy-Speaker: I am sorry to interrupt, but I have given the hon. Gentleman an intimation as to how he might appear to be in Order. I hope he will remember that.

Mr. Amory: I think my next words will make quite clear what I am leading to, Mr. Deputy-Speaker, and I am sorry if I am saying it in rather a clumsy way. I was saying that perhaps we employers have tended to keep information too much under our hats, particularly information that has a bearing on profits. I believe that joint consultation is the best way of dealing with that difficulty. I ask my trade union friends to pursue with us a joint search for more efficient methods, and as an employer I say that when that search is successful the proceeds should be shared by all concerned—the consumer, the wage earner, the manager and the owner of capital. That is rather better realised in America than it is over here.
In this matter of profits, trade union leaders tell us that they have great difficulty at present in putting over what I may call the wages-profit relationship. If they tell us that, I accept it. Incidentally I wish to pay a tribute to the work many trade union leaders are now doing in endeavouring to put this over. They tell us that their difficulty arises from the argument, "Why work harder for the bosses?"

Mr. Gallacher: That is a good question.

Mr. Amory: If that is a difficulty—

Mr. Gallacher: The fellows on this side are dodging it.

Mr. Amory: —I hope they will forgive me if I say that it is partly a difficulty they have created for themselves. If I felt with certainty that limitation of profits would solve that problem without disastrous consequences, I would be perfectly ready to consider statutory limitation of profits, but I think it certainly


would not. I remember reading some wise words of the late Sir George Chester, a trade union leader for whom we have great respect. He used these words at the T.U.C. Conference in 1948:
Marginal surplus or profit is essential to the conduct of British industry. Whether it is nationalised or in private hands, industry as now organised depends on incentives. For the T.U.C. to press for statutory control of profits would in present circumstances do a greater disservice to the country and to the British people than any other action they could take.
Today, and for the last few years, paper profits are undoubtedly in many cases high. The conditions of the last few years in a sellers' market have been too easy for us all—too easy to earn a profit, too easy to hold down a job in many cases.

Mr. Gallacher: Will the hon. Member forgive me for interrupting? If they are only paper profits, why not give them up and save all this trouble?

Mr. Amory: Because unfortunately these paper profits have to be used in industry in a way I will explain. When I say paper profits, I mean profits that are shown in the accounts of the concern, but a good deal of which are not available for distribution in cash. The cost of replacing assets in industry is terrifically high. Anyone concerned will know that to replace machinery costs two and a half to three times what it did before the war. Even though one is earning a higher rate of paper profit, it is extraordinary how often one finds that one is not fully maintaining the value of the assets. Competition is the best way of bringing profits down, and as it is restored it will bring profits down, embarrassingly perhaps. Whoever may be the Chancellor in two or three years time, I believe he may look back rather wistfully to the level of profits that we have seen in the last year or two.

Mr. Chamberlain: If the hon. Member insists that the profits which have been made are paper profits, why does he now say that he wants to bring them down?

Mr. Osborne: He did not say that.

Mr. Amory: I said that competition is the best way of ensuring efficiency. It is a painful process for those concerned, let there be no doubt of that, but it is a good way of ensuring good value to the consumer.

Mr. Gallacher: Rent is robbery, profit is plunder.

Mr. Amory: I am in favour at the present time of the voluntary limitation of dividends and of the voluntary freezing of wages. My hon. Friend the Member for Edgbaston (Sir P. Bennett) claims the paternity of this proposal. I am not sure that I shall not claim it because, in one of the few speeches I have made in this House, in a manpower Debate about six months before the Chancellor said anything about this, I said that a truce of this kind for a few years would be a good plan. The Cabinet Minister who replied said that it was a nice idea but that he doubted whether it was practicable. Let us, however, not delude ourselves. A standstill agreement of this kind is all right for a time, but for a long period it is thoroughly bad and dangerous. Whilst at present I support it wholeheartedly, it is one of the factors which works against the better deployment of our manpower.

Mr. Chamberlain: I apologise for again interrupting, but we ought to get this straight. Does the hon. Member not know that the limitation of dividends was a poor second best to what the Chancellor asked? Does he not remember that the Chancellor asked that industry should give a definite scheme for price and profit reduction, but that all he got was this "phoney" business of limitation of dividends?

Mr. Amory: I cannot agree with the description applied by the hon. Member, and from the way I have heard the Chancellor of the Exchequer refer to this matter on several occasions, it seems to me that he has been well satisfied with the result.
The matter of profits should be regarded in proper perspective. During the last ten years or so the national income has doubled. Wage earnings have gone up 129 per cent. gross. Net wages, when adjusted for cost of living, have risen, I believe, 20 per cent. During the same period distributed profits have gone up by about 45 per cent. gross; but on a net figure, after adjustment has been made for the cost of living, they have gone down 24 per cent. Distributed profits represent about 4 per cent. of the total of personal incomes, salaries and wages—net—between 50 and 60 per cent., and taxation 40 per cent.
I ask hon. Gentlemen opposite to accept the implications of those figures. I am the last person to want to lecture them on subjects about which they probably know far more than I do, but do hon. Gentlemen opposite really want to encourage risk-taking? In some ways we may think the views of Americans on these matters may not be as well balanced as ours. Their tremendously competitive instincts may amount almost to a disease, but it is a disease by the germs of which, in our present predicament, we might do worse than be infected. In America trade unions delight in the high profitability of the industry with which they are concerned. The higher it is, the better they are pleased.
The best answers I know to this difficult question are, first, the widest possible extension of the principle of payment by results in some form or another. It is rather sad to reflect that in British industry today not more than about 25 per cent. of the workers have their remuneration linked in any way with output. Secondly, joint consultation is a thoroughly sound way of helping to deal with the problem. Thirdly, I believe profit sharing can help very much.
If we on this side accept the psychological difficulty which faces hon. Gentlemen opposite in getting these facts over, I hope they will accept the psychological difficulties which confront us in those attacks on employers in general which are made from time to time by some, but by no means all, hon. Members opposite. Threats of that kind are an impossible basis for further goodwill and co-operation and for long-term planning and risk-taking. We on this side of the House oppose the tax contemplated in the Bill not because those of us who are employers want to escape in any way our share of any sacrifices which may be required, but because we believe that it is a bad tax.
We must all take stock of the situation, and each consider whether we are helping to do the right and best things to ensure that the hallmark "Made in Britain" shall mean the highest possible quality and the best value that money can buy. Of hon. Gentlemen opposite I beg two things: first, not to confuse social justice with absolute equality of income. "Fair shares for all" is an

excellent principle, but absolutely equal shares of everything for all may produce disastrous consequences. We want as much social justice in industry as we can possibly get, and we must all ceaselessly try and experiment to see if we can achieve more. The view, however, that anything above the average should be seized and confiscated is not social justice. If that kind of plan is followed we shall not find a solution to our economic troubles or anything very bright in the way of a future for voluntary savings
My last request to hon. Members opposite is that they should have the courage to retrace their steps along a road which, I believe, is leading to terrible rigidity in industry at a time when our greatest need is flexibility. That rigidity will be an appalling handicap in the highly competitive conditions in which we as a nation have to earn our livelihood. It has been well said that the present policies of the Government must be judged by their effects on work, thrift and enterprise. That is very true. Let each of us here try to free ourselves as far as we can from prejudice and give an honest lead to the nation in a crisis in which the eyes of the world are upon us.

6.27 p.m.

Mr. Douglas Houghton: One conclusion which we have drawn from the speech just made by the hon. Member for Tiverton (Mr. Amory) is that we live in the age not only of the economic man but of the political man. We live in a time when capitalism has to come to terms with the great mass of the people who are searching for the foundations of the society in which they live and the moral and social justification for the established order. That is why hon. Members opposite are in favour of joint consultation and taking the workers into their confidence, and getting the facts of the Profits Tax and other economic factors in industry over to the workers. Hon. Gentlemen opposite realise that the whole basis of our society rests upon coming to terms with this newly powerful—politically and industrially—mass of workers who are examining the whole of our structure with very great care.
I am rather surprised not to have heard in any of the speeches yet made this afternoon a reference to the grave and anxious discussions now going on within


the Trades Union Congress, to which reference was made in all the newspapers this morning and upon which a leading article in "The Times" must, surely, have caused all Members of the Opposition to pause and consider what should be their political action on this very day when the Second Reading of the Profits Tax Bill is under discussion.
What do hon. Members opposite think would be the effect upon the trade union movement and upon the deliberations now taking place within the T.U.C. if today the Bill were rejected by this House? What do they believe would be the effect upon industrial relations? Do they not realise that the rejection of the Bill would undo all the work which the responsible leaders of the trade union movement have been doing for weeks and months past and would certainly, to say the very least, vitiate the deliberations now going on within the Trades Union Congress?
Hon. and right hon. Members opposite, and particularly the right hon. Member for Saffron Walden (Mr. R. A. Butler), have referred throughout their speeches to encouragement and incentive. Those words were freely used. We were led to believe that an additional incentive to industry, and especially to industries engaged in export trade, would be freedom to make still higher profits. But at the very same time, on the trade union side at all events, we are seeking to restrain workers in all industries, including those in the forefront of the export trade, to work harder for no more money. How, then, can the House reconcile the suggestion that the additional incentive to industry must be freedom to make higher profits and yet at the same moment workers in those industries must restrain themselves?

Mr. Assheton: I hesitate to interrupt the hon. Member, he being such an excellent and controversial debater, but the proposal in this Bill is to reduce profits by taxation. There is no suggestion here to increase profits, but to reduce them.

Mr. Houghton: Surely the object of this Bill is not to reduce existing profits; the main purpose of this Bill is to curb increasing profits. That is why the Chancellor of the Exchequer had to describe it as "rough justice," and the Economic Secretary to the Treasury said

in his speech that it is unfortunately impossible to find any basis for a discriminatory tax and, therefore, it has been necessary to impose this slight additional tax on the whole of profit income. We see this point of view expressed in somewhat different terms in the "Financial Times" on Wednesday, 28th September. It said:
Why has the Chancellor raised the distributed profits tax from 25 per cent. to 30 per cent. and why has he threatened to make dividend limitation compulsory? … All the surrounding circumstances and notably the reference to the wages freeze … point in one direction. These are the twin efforts to keep the trade unions quiet.
I do not know whether the trade unions are going to be kept quiet. That is the anxiety which trade union leaders of today have; the anxiety as to the basis upon which the trade unions can be persuaded to restrain demands for increased wages in circumstances where they have great industrial power. But is there anything unworthy or undesirable in this grave hour in trying to placate the trade unions? Is it not a political and economic necessity to do so? How can we possibly get through our difficulties unless we can get that confidence among the mass of the workers that they are not being asked to work longer or harder and to produce more, for no more wages, when at the same time the profit income is increasing and the equity holder is making a better thing out of their efforts?

Mr. Osborne: Can the hon. Member give an example where the workers have been asked to work harder and longer without increased wages? He has said that twice tonight.

Mr. Houghton: I cannot give an example where workers have been asked to work longer, but in fact over the whole range of industry workers are being asked to work harder, which means greater production. At all events, hon. Members will agree that the accepted basis of industrial production at the moment is upon greater effort and greater efficiency by workers and by managements alike, but workers essentially, for the purpose of getting increased production.

Mr. Kirkwood: It cannot be got without the workers.

Mr. Houghton: The "Financial Times" also said, and this is another point


echoed especially from the benches opposite:
If one thing is certain it is that the country's investment problems will never be solved so long as capital is continually and continuously punished:
A few days earlier in that newspaper full particulars were given of the rewards, or the degree of punishment, should I say, that capital was getting. I looked up quotations including those of 57 drapery concerns, 35 electrical and radio quotations, and 120 industrial quotations given in the "Financial Times" on 19th September, 1949, and this is what I found: out of a total of more than 200 companies, 33 were distributing under 10 per cent., 93 were distributing between 10 per cent. and 20 per cent.—[An HON. MEMBER: "Of what? "]—dividends. They were declaring in the case of 33 a dividend of less than 10 per cent., in the case of 93 they declared a dividend between 10 per cent. and 20 per cent., and in the case of another 93 a dividend of 40 per cent. or more.
Those are the punishments that equity holders are getting at the hands of the Government. I fully appreciate that many equity holders have paid a premium price for the shares and the net yield on their investment is nothing like 10, 20, 30, 40 or 100 per cent., but many equity holders have held those shares a long time and had capital bonus shares given them in addition to the excessive dividends they received on their original holdings. It really will not wash at this time, of all times, for hon. Members of the Opposition to refer to the discouragements and disincentives given to the profit earner, when actually we are not talking of the profit earner, but of the profit receiver. The profit earner, if I may say so with great respect, has other means, of which he freely avails himself, of getting his rewards out of industry. The management and industrial proprietor is not dependent upon the dividend distribution of his company for his slight rewards for the efforts he makes. He has other means, in remuneration and directors' fees and in other ways.
May I put this proposition to the House? What we are asked to consider here is what are fair profits in relation to the times in which we live, in relation to the rewards given to those who are working in industries which are pro-

ducing those profits. I suggest that an acceptable basis for fair profits in 1949 would be that the rate of return on capital should be neither higher nor lower than the rise in labour incomes in private industry over the last 10 years. That seems to me to be a fair basis.
That is to say, that we should accept the proposition that the return on capital should rise in harmony with the rise in wages as compared with 1938. I think that is a very fair basis indeed and, if it is suggested that account must be taken of the increased cost of replacement and depreciation, my reply is that if the costs of replacement have outstripped the cost of living, allowance for that should be made in the depreciation set off for taxation purposes. That is the proper way to do it and not to aim at a higher ratio of overall profit in order to achieve a still higher distribution.
If we take such figures as are available in the Bulletin of the Oxford University Institute of Statistics for July and August this year, we find that basic wages have risen 86 per cent. compared with 1938. The rise in total earnings was given by the hon. Member for Tiverton (Mr. Amory) as 129 per cent.; my figure is 124 per cent. The return on capital over that of 1938 is 174 per cent. There is the comparison—basic wages 86 per cent. higher, total wages 124 per cent. higher, and the return on capital 174 per cent. higher.

Mr. Assheton: Before taxation?

Mr. Houghton: That is gross, as wages and total earnings are gross.

Mr. Orr-Ewing: When the hon. Member speaks of "return on capital" does he really mean the return on the total amount of capital employed in any one business?

Mr. Houghton: No. For the purpose of these figures I understand that Professor Barna has assumed that the amount of capital employed in business in 1949 is in total the same as that employed in business in 1938, with the difference only that new capital for development during the last ten years has come mostly by way of capitalising excess profits which were held in reserve and were undistributed, and not by public subscription. So the increased amount of capital in business today compared with 1938 is really the product of profits which have


in many cases now been capitalised to increase the capital foundation of the enterprise.
We have to bear that very much in mind when looking at this question of dividend limitation. When one sees that a certain dividend has been declared it is important to find out whether it has been declared on an increased amount of capital or on the paid-up capital which was the original basis of the company's undertakings.

Mr. Orr-Ewing: Can the hon. Member give any indication of the effect of the limitation on capital issues as regards the picture he has just drawn? Is it not a fact had there not been a rigid control of capital issues, particularly on the total amount, the capital involved would have been very different from what he has indicated.

Mr. Houghton: I should be diverted from my theme if I were to examine the proposition that industry is morally justified in making excess profits to accumulate large reserves for further capital development and then to capitalise it for distribution in the form of bonus shares If I were to examine that proposition I should be very critical of it. If industry requires fresh capital it can ask for it from the source from which it usually comes, and it should not make the customer pay and create inflationary conditions by first making excess profits out of excessively high prices and then turning round and saying that this additional money is being ploughed back into the business. Whose money was it, from whence did it come and what was the inflationary consequence of making high profits?
I conclude by again referring to the great importance of this tax, call it a gesture or placating the trade unions if hon. Members will. I warn them of something which they must be able to see for themselves. The whole trade union movement is at the moment behind the Government, and there is more confidence in the present Government by the trade unionists of today than there has been in any Government which has previously been in power in this country. That confidence is hanging by a slender thread because the trade union movement is not yet fully satisfied that His Majesty's Government will deal energetically and

courageously with the exploiter and the excessive profit maker. It is no use getting away from that. Hon. Members opposite must realise the times in which we live and must adapt themselves to those times. I believe that the Opposition are making a great political mistake as well as doing a serious injustice to the whole equilibrium of our economy and the relationship between the trade unions and industry today by voting against this Bill.

6.46 p.m.

Mr. Hugh Fraser: I have listened to many speeches this afternoon, and on the whole the most lamentable one was that of the hon. Gentleman the Economic Secretary to the Treasury. I am sure that when he heard the speech of the hon. Member for Blackley (Mr. Diamond), which was a very able speech indeed, he must have felt refreshed only by the thought that the hon. Member for Blackley has so many irons in the fire in the capitalist world that he is unlikely to be prepared to displace him. The speech made by the Economic Secretary was lamentable in every sense.
The question of this tax should be examined by the House from four points of view. The first is whether the tax will do any good in advancing our export trade to foreign countries, especially to those dollar countries on which we now so largely depend for our food and raw materials. The second is whether this tax will in any way add to the efficiency of British industry. The third is whether it will in any way lead to a reduction of prices. The fourth is what the psychological effect of this tax will be.
On the first point as to whether the tax will be of any benefit to our exporters, the Economic Secretary to the Treasury made the point that the tax was in no way a deterrent in so far as it fell equally hardly on every producer in the country. Perhaps the hon. Gentleman has forgotten, but at the moment every industry in Europe is competing to gain a place in the American market. Had he recalled some of the things which have been done in foreign countries, he might have been less glib and sanguine in what he said. In France, everything which is being exported to America, great classes of goods, are exempt from purchase tax. In other countries ten per cent. of its dollar earnings are allowed


to the firm which gains an export footing in the United States.

Mr. Mitchison: Are exports from this country not similarly exempt from Purchase Tax?

Mr. Jay: I assume that the hon. and learned Member knows that all exports from this country are entirely exempt from Purchase Tax.

Mr. Fraser: Perfectly, but I was referring to the home market. A French motor car of a category which is exported is exempt from Purchase Tax in the country of origin. That obviously decreases cost of production. It might not be the right policy, but when the Economic Secretary to the Treasury makes the statement that no firm in this country will suffer if it engages in the American export market, he should compare firms here with like firms in France, Belgium and Italy, where tremendous advantages are given.
The second point is this; what will be the effect on industrial efficiency? agree with the point made by the hon. Member for Blackley, who went into considerable detail to prove that the incidence of this tax on industry would not be very high. There is quite a lot in that argument. I would only say that where the hon. Member for Blackley went wrong in his consideration was that this tax does not fall on a turnover throughout the year, but on what is called the breaking point, that is to say, whether the firm makes a profit or a loss. The hon. Member for Blackley was assuming that industry worked on a complete run through the whole year, without any break or change, but smoothly and perfectly in an ideal and theoretical state. In point of fact, this Profits Tax falls at a more difficult point in the economic position, and especially it is a deterrent to certain companies with a certain capital structure.
I believe that the effect on efficiency cannot be helpful and may indeed be unhelpful. It is even possible that the Chancellor of the Exchequer may lose money for this reason; that certain people engaged in a small industry may well think that they no longer need bother so much about returns and profit or loss; that if they spend a few pounds one way or another—on a motor car or having the

office done up—it does not very much matter. I believe that the brake of profit and loss is always destroyed by this sort of taxation. My right hon. Friend on the Front Bench has pointed out what will be the effect on the larger companies where money will have to be drawn out from the moneys which otherwise might have gone to reserve.
It is useless for the hon. Member for Central Southwark (Mr. Jenkins) to make a long, complicated type of schoolmaster speech, which I suggest that he did make, pointing out that the effect of this tax would be similar to that of raising the interest rate. The point of this tax is that it is a direct disincentive to saving. But to get back to the point I was making that it may not lead to efficiency; in fact it may go completely the other way. It may lead to less industrial efficiency. It is quite conceivable that people will become slacker than they are.
We then come to what I believe to be the most important point, which is the question of the effect on the price structure. After all, that is the root matter in British economy today; can we get costs down and goods to our own people at a reduced price? Can the goods which we export be reduced in price also? Everything falls into the shadow of unimportance compared with this overwhelming factor. Will this tax lead to a cutting of costs or not? Probably it will do neither. It is a negative tax and therefore, one may say that perhaps it is an unimportant tax, but it does nothing to help and may, I believe, be a hindrance. I quote a Socialist Member who spoke the other day on this very issue, the hon. Member for Stroud (Mr. Parkin). In last Wednesday's Debate, he said:
I think that to be attacking the high profits is to start at the wrong end; I think that we and the trade union movement ought to be gunning for the firms who are not making any profits. That is our problem in connection with prices, and one which arises out of our success at achieving full employment. We are protecting the inefficient.
"We are protecting the inefficient"—that ought to be blazoned in every office of the present Government.
The big gap of prices is the one which has to be closed, and, therefore, we ought to gun for the fellow not making profits."—(OFFICIAL REPORT, 26th October, 1949; Vol. 468, c. 1417.]
I believe that to be the most important fact which can emerge from this or any


other Debate at the moment. The truth of the matter is that the Government are inflation-minded. It is a money bull. So long as there is no want of money being paid out in wage packets or in Government expenditure, they think that all is O.K. All is not O.K. Doubtless the Economic Secretary to the Treasury knows the rather mean American joke which is now circulating, that by January of next year, the pound will be able to look one dollar in the face. That is what we are faced with today. The issue before this country is whether we are to have another devaluation or not. That is about the weight of it. And all these talks, these lengthy and tedious figures read out by hon. Members opposite, fall into the shade compared with the importance of three things; increase of efficiency, reduction of prices and the stimulation of our export market. I suggest that this tax does none of these things.
In one sense it is only a thing which tends to make permanent some of the difficulties from which our economy is temporarily suffering. I believe the difficulties are two-fold. First, there is nothing like a sufficient cut in Government expenditure, and secondly nothing is being done by the present Government to meet the circumstances of devaluation. Nothing whatever is being done to see that the advantages which might accrue from devaluation fall upon the people of this country. On the contrary, only the longterm disadvantages so fall. This economy at the moment, as the Chancellor of the Exchequer has said, is an economy burdened with inflexibilities and immobilities, and until they are got rid of there will be stagnation, and the price of goods will automatically tend to rise. I quote what the Chancellor of the Exchequer said last Wednesday:
A country with so large a proportion of overseas trade as our own in these days of dynamic development throughout the world needs an especial degree of flexibility and not of rigidity in its industries."—[OFFICIAL REPORT, 26th October, 1949; Vol. 468, c. 1333.]
I would like to take one other extract from the speech of the right hon. and learned Gentleman:
To insist"—
at this time—
upon the rigid maintenance of the present pattern of employment would be to destroy

all hope of full employment."—[OFFICIAL REPORT, 26th October, 1949; Vol. 468, c. 1343.]
Those are very serious things.
Now I turn to the psychological effect, which has been stressed by hon. Members opposite, and here I come to the thorniest and most difficult part of my argument, the question of the White Paper. As we know, already negotiations are going on inside the Trades Union Congress itself as to whether the White Paper can continue to be observed or not. I do not know what the answer will be, but this I do know, that it is only by freeing our economy and by getting rid of the system of Government controls and quotas and the rest, that there can be the mobility and flexibility of economy which can produce goods at lower costs. It is only by competition inside our economic system that these things can be effective.
Whether the trade unionists be right or wrong, one can at least say this of them; they are now looking, as trade unionists, to the industrial interests of those workers who are affiliated to them and not to the political interests of trade union leaders. Hon. Gentlemen opposite had better be careful. The trade union movement has supported them up to now and from it the Labour Party sprang. But if they do not produce an economic policy which affords some hope of salvation for this country, the trade unionists as a body will leave the political party which up till now they have supported. They will become an independent body of men supporting their industrial interests, as has happened in the United States. We must face these facts.
Unless the present rigidities of the economic system, as described by the Chancellor, are overcome, unless there is more competition in industry, unless there is a Government policy which sees that the present high rate of profit—and so easily made profit—is cut down by competition, this country will automatically founder and there will be further devaluation of the pound. That is the issue. It is for the Government to produce not this tiny tax, which is of no real importance one way or the other—though in so far as it has any importance it is a bad importance—but to think out what are the necessities of devaluation.
These necessities are simple enough. There must be a far heavier cut in Government expenditure. There must be competition once more in the economic system. Provision must be made so that labour can work for its right price and sell itself at the right rate. The labour leaders are not irresponsible. They know that too high wages can not only buy more goods but can also buy unemployment. Those who support this White Paper are, so to speak, supporting something which is a "dead duck." We are fighting a battle over a fortress which has fallen long ago. We are faced by the grim facts of devaluation and our economic crisis. We have tried planning, and planning has failed. Unless there is a liberalisation of the economy, this country will go down into something approaching ruin. Hon. Members opposite must remember that other Socialists—Lenin, for instance—had to introduce new economic ideas—

Mr. Mitchison: On a point of Order. Are we discussing the adventures of Lenin or the Profits Tax?

Mr. Speaker: We started the Debate over a very wide field, and so we must go on.

Mr. Fraser: I am sure that the hon. and learned Gentleman will one day perform the feat of a Kerensky.
I have outlined the grim facts of the situation which the Government are failing to meet by this tax. They had better think again, and they had better think hard before they lose the support of the trade union movement and before they destroy completely the economy of this country.

7.4 p.m.

Sir Richard Acland: I hope to follow the comments of the hon. Member for Stone (Mr. H. Fraser) later if I am not out of Order. On at least one point I can start in agreement with him, because this country is in very grave danger. Taking a 10 or 15 year view, it is in grave danger of going down into possible social and industrial chaos unless by peaceful means we can transform the whole nature and structure of the country in accordance with the growing aspirations and the changing ideas of millions of ordinary people everywhere.
The Liberal economy—so beautiful in the eyes of hon. Members opposite—worked reasonably well and gave reasonable satisfaction to our forefathers of 60 or 70 years ago, very largely because in those days many millions of people here, and still more millions in other parts of the world, acquiesced in lives of unending toil and grinding poverty in order to sustain in extraordinary levels of comfort and luxury people whose incomes depended substantially on profits and dividends. That acquiescence is ever more and more ceasing to exist. It is no use for hon. Members opposite to wish that it could be brought back into being.
In particular, I think that it is a great mistake for hon. Members opposite to think and to speak as if wages and profits were things of the same kind which can be balanced against each other and considered of the same order of being. Wages arise from work. Profits and dividends arise from the ownership of property. I submit to hon. Members opposite that, as the years go by, the people of this country and of the world are taking an ever-changing view about what should be the rights accorded to mere ownership of property simply considered as such.
On this point I want to quote from a Christian authority. It is a quotation which will be of special interest to the hon. Member for Chippenham (Mr. Eccles), who has used a part of it, but a part only, himself. The original from which I quote was written by the late Dr. Temple, Archbishop of Canterbury, in a letter addressed, strangely enough, to me. But that letter has been requoted in Dr. Iremonger's biography of the late Archbishop. In a Tory pamphlet called "The Property-Owning Democracy"—whatever on earth that may mean—which the hon. Member for Chippenham has written, and also in a letter to "The Times" in a controversy with myself, he quoted two sentences from the Archbishop which on first reading appeared to be very favourable to the views of hon. Members opposite. They are:
The heart of it …
that is to say, the heart of the Christian doctrine of property—
… is a full recognition of private property combined with an insistence that it must always carry responsibility. The property without the function is the thing condemned.


Those two sentences were quoted by the hon. Member for Chippenham. I do not quite know how it was intellectually possible for him to read, as he must have read, the next sentence from the Archbishop and not to quote it also, because that was:
Now this condemns a very large amount of the property that exists today; to some extent in land, to an enormous extent in stocks and shares.
I think that hon. Members opposite ought to recognise that in the eyes of ordinary people it is becoming less and less clear that there is any moral right to draw an income merely on account of the ownership of property apart from the discharge of function. That view of the ordinary man in respect of enormous quantities of stocks and shares is backed by the authority of no less a person than the late Archbishop of Canterbury. Unless we are, by peaceful means, steadily to transform the whole structure of our country in the light of that growing aspiration and growing opinion of masses of people, it is certain that we shall reach stagnation, industrial chaos and unlimited disaster.
I should like to make one other point about this whole Debate. It seemed to me that the speech of the hon. Member for Abingdon (Sir R. Glyn) was of outstanding significance, in part because—if I do not over-flatter myself—it appeared to me that he had some sort of feeling for the kind of thing which I have been trying to express, but much more because his speech exposed the attitude which has been taken up by the Opposition as a whole. It is all very well for the Opposition to accuse the Government of taking a class view on this subject. It is all very well for the Opposition to deny that their policy is to put the increasing burden upon the poorest of the poor and to offer increasing rewards to those who are the richest of the rich.
I think that by now it is quite possible to say, beyond a doubt, from the speeches of the Leader of the Opposition, that this is indeed their policy. For already devaluation and the cuts which the Government have imposed affect the poorest the most; they affect the people in the middle next and they affect the people at the top least of all. That is inevitable in the nature of the cuts. The rise of a penny in the price of bread affects most hon.

Members of this House very little indeed, but it affects the poor very greatly indeed, and so we can go on, taking one cut after another.
The Leader of the Opposition, in his speech in the recent Debate, definitely asked for far greater cuts than have already been made, not as a check to inflation, not to reduce Government expenditure, but in order to reduce taxation. His cuts, if they were made, would affect the poorest still further, and the reduction of taxation, as we can see by looking at the speech of the right hon. Gentleman the Member for North Leeds (Mr. Peake), is to be a reduction in direct taxation. If that means anything worth talking about, it means at least a shilling off the standard rate of Income Tax, and that is what the Leader of the Opposition must have in mind. It must be so; at least, if it is put forward as a contribution which could have any serious effect on our country.
Such a proposal would, of course, bring some benefit to a working man who is fortunate enough to have a wife and two children and a wage already up to £8 per week, because it is at that level that he begins to pay P.A.Y.E., and a reduction of a shilling in the standard rate of Income Tax would make a difference to him of a few pennies a week. To any worker receiving £10 or £15 per week, the proposal of the Leader of the Opposition would make a difference perhaps of several shillings. But what is the difference which it would make to a man whose gross income was £10,000 a year—and there are many whose gross income is of that amount? Today, they are being taxed pretty highly; it depends on their circumstances, but it may be that £6,000, £7,000 or even £8,000 is being paid in tax, leaving them £2,000 a year, which is about £40 a week. A shilling off the standard rate for them means £500 a year, or an extra £10 a week. Is it at all deniable that the proposal of the Leader of the Opposition quite definitely means that we should meet the present crisis by putting heavier burdens on the poor and offering extra inducements to the richest of the rich?

Mr. Beverley Baxter: May I ask the hon. Baronet a question? Does he think that the present standard rate of Income Tax is exactly right, and that to alter it would be wrong? Or


would he like to see it go still higher, and if so, by how much? Would he indicate where he thinks it should stop?

Sir R. Acland: One has to take the level of particular taxes in relation to circumstances of the time, but since the hon. Gentleman invites me to say whether I think the standard rate of Income Tax should go higher or not, I would say that, seeing what extra burdens are imposed on the poorest of the poor, I am sure that the Government, if they cannot find any other way to do it, should put up the Income Tax by another two-pence to raise money to increase the National Assistance rates by 2s. all round. I think that is something which will have to be done in order to even out the burden.
The whole attitude of the Opposition differs very startlingly from the attitude of the hon. Baronet the Member for Abingdon, and I am sure is athwart the main stream of the development which our country must take in the coming years if we are to avoid unlimited disaster. As to the suggestion that we need an economic policy which will really see the country through, which was made by the hon. Gentleman the Member for Stone—a policy which will stop favouring the inefficient—I cordially agree with him on the need for such a policy, but I entirely disagree that we can do that by giving them free competition. In the years between the wars, in the textile industry we had as much competition as Conservative Governments could provide, and nobody reading the letter from a former hon. Member of this House, Sir George Schuster, in "The Times" of 22nd October, would claim that it produced a very high state of industrial efficiency.
I state my opinion most positively that this Government will be obliged to take much more definite measures and much more positive control, and I agree that my right hon. Friend the Home Secretary was both right and courageous in the speech which has been referred to when he foreshadowed that we should have to take such measures, as, for example, giving special assistance in the supplies of scarce raw materials to those firms which show that they are efficient and are able to win a place in the dollar market, and withdrawing supplies from

those who, in spite of every encouragement and opportunity, stil remain inefficient. I am sure that this chance given to industry to respond to the favourable climate for exports which is now given to them is about the last chance that industry has of making the present system of control work, and that, if this fails, the answer is not to go back to Victorian free competition, but rather in the direction foreshadowed by the Home Secretary in his recent speech.

7.18 p.m.

Mr. Osborne: I was just about to ask the hon. Baronet the Member for Gravesend (Sir R. Acland) if he believes that we shall require more direction as things get worse, as he seems to fear. Why does he stop, and where will he stop short of full-blooded Communism, which demands complete direction of labour? That was the question that struck me. If he thinks with the Home Secretary that we shall have to have considerably more direction, why does he boggle about joining the hon. Member for Mile End (Mr. Piratin) and going the whole hog? What is he afraid of?

Sir R. Acland: If the hon. Gentleman wants an answer, I might be drawn into a long reply, but I will tell him this: The difference between us is that in the Labour Party we shall allow our opponents full opportunity to express their views, to organise their opposition and to defeat us in elections if they can, whereas the hon. Member for Mile End and the Communist Party, if they were in power, would liquidate both us and hon. Members opposite if we attempted to express our opinions.

Mr. Osborne: In economic planning, there would really be no difference.
May I now try to bring the discussion back to the Bill and to the subject of this tax, and may I put to the Financial Secretary three reasons why I think this is a bad tax? In the first place, I am convinced that we shall not be able to tax ourselves out of our difficulties. Mere taxes will not get us out. We have far too many taxes already; what we ought to do is to concentrate more on production. I think this is a bad tax for three reasons—first, it is unsound; secondly, it is footling; and, thirdly, it is politically vicious. The Prime


Minister, on 24th October, said in justification of the tax:
Devaluation has opened up great opportunities for export.… Instances are high quality textiles."—[OFFICIAL REPORT, 24th October, 1949; Vol. 468, c. 1024.]
He then went on to mention a number of other trades in which he thought there were great chances of increasing our exports.
I shall give the House one or two figures which have just come from America. The Wool Associates of the New York Cotton Exchange make the following points:
The wool cloth imports from the United Kingdom to America last year were 7,200,000 yards. Ten years ago they were 4,700,000 yards."—
I want the House to bear those figures in mind—
American productions themselves for the current year are estimated at 310 million yards as against last year 425 million.
A recent report of the Wool Associates says:
United States manufacturers are frankly apprehensive of greater competition from British imports. The blow is all the more disquieting because it comes at a time when the market for domestic fabrics is shrinking. The situation is fraught with danger. American producers have been curtailing output. There is a unanimous agreement that tariff barriers, if not additionally fortified, must be maintained at all costs.
I submit that this is evidence of the fact that there is not an easy market for us in America as was suggested by the Prime Minister, and that we are going to run into great difficulties. Our problem as manufacturers—and I speak as one who has some interest in textile exports—will be to maintain our exports to America. It is going to be increasingly difficult.
The second reason why I think this tax is unsound arises from what the Chancellor said on 26th October. He said:
In some industries devaluation will lead to much larger profits."—[OFFICIAL REPORT, 26th October, 1949; Vol. 468, c. 1351.]
With regard to certain established industries, that is true. We are being urged as manufacturers to go into the dollar market, but I would point out that the business of new exporters to American markets will be carried out either without a profit or even at a loss. I think that most people who have had any experience of trying to get into the American market

during the last two years would agree with that. Therefore, to say to those people, "Just when you are struggling to carry out the policy which we are asking you to carry out in the national interest, we are going to tax you still further," is ridiculous.

Mr. Piratin: What the hon. Member has just said amounts to a contradiction. If when one exports, one is going to make a loss anyway, why worry about the increased Profits Tax?

Mr. Osborne: If the hon. Member will allow me, I shall explain it even to his simple mind. It is perfectly true that most of the people who have to get a footing in the American market will be very lucky if they recover their overheads. I will, if I may, give an example from my own company. In the first six months of this year, compared with the same period last year, our exports were up by 68 per cent. On the other hand, our profits are down by something like 30 per cent.—I shall not give the exact figure because it is a public company—and yet we continue to export because it is our duty. We are doing our best to answer the Government's call.
I have here a dozen actual orders from America for high-grade textiles which my company has recently executed. They came from New York, San Francisco, Toledo, Atlanta, Kansas City, and Pittsburgh. If any hon. Member wishes to see them afterwards, he may do so. These orders involved the making of 15 different garments necessitating 48 basic changes on large machines. Garments made for the American markets are quite different from those made for the English market. One finds that the garments which the Americans will accept are not suitable even for the Canadian markets. They have to be shaped, styled and sized quite differently. This means cutting right across the normal home production, thereby reducing the profitability of the home trade.
It follows, therefore, that there is not only no extra profit for those answering the Government's urgent call to go into the dollar market, but, in most cases, either losses or very considerably reduced profits. It is useless denying the fact that by doing this, the home consumer is being asked to subsidise our exports. That being so, no greater profits are to be


obtained as a result of devaluation by exporting to the dollar market.
My second objection to this tax is because I think it is footling. We are living as a nation beyond our income to the extent of £400 million a year. If it had not been for the utmost generosity of the American worker and taxpayer we should have had to institute savage cuts such as few hon. Members on either side would care to consider. Unless we fill that gap when American aid finishes, those cuts must come, whatever Government are in power. Therefore, I submit to the House that a tax producing only £13 million with which to fill a dollar gap of £400 million is just playing with the situation. This Government have done nothing but play with the economic situation ever since they were first frightened by it. The effect of this tax is like a pinprick to the industrialists who are being asked to make special efforts to export their goods to the dollar market. It is a pinprick that does not matter very much, but it tends to put exporters off doing their job, especially when they know that the next stage in taxation is going to be a capital levy. It is also dangerous to continue the illusion in the minds of the workers that, somehow or other, our economic crisis can be overcome by "soaking the rich" still further.
My third and last objection to this tax is that I believe it to be a vicious political tax. The real reason for it is not economic, but political. Why was it imposed? Most business men feel that this tax was imposed for one reason only, namely to keep the Minister of Health in the Cabinet. It was in order that the Minister of Health should not resign and form that splinter party of which some of his colleagues are so afraid. It is, as it were, an offset to the bitter pill which the right hon. Gentleman has had to swallow in the form of a shilling on prescriptions. His scheme is no longer a free health scheme and, therefore, this tax is proposed as an offset.
I am sorry that the Chancellor is not here tonight because I wanted to say this to his face; I am sorry that I must say it when he is not here, but I think it should be said. There are many business men who have no close political affiliations but who had a very high regard for the Chancellor of the Exchequer.

They thought he was a much finer man than his predecessor. They believed in him and they had a great regard for his personal integrity. But they have had a rude shock recently. No man's public character has gone down so heavily—I say this with great sorrow—as has the present Chancellor's in the last few months. Those business men who thought so highly of him previously do not believe his word today. They wistfully thought that it was he who would save England in her crisis, and they now feel that he has failed them. If he had decided to resign rather than devalue the pound I think the average business man would have regarded him as the greatest man in the country. Today they feel that he has completely lost his high standing.
For those of us who sit on these benches, to see him about a month ago publicly embrace the Minister of Health after a speech full of hatred and bitterness from that human dynamo of hatred, was a dreadful and shocking sight. The Chancellor of the Exchequer will never again have the pull with the business community that he previously had. I do not think hon. Members opposite realise the significance of that. As I see it, there is no one else on the other side of the House who can quite take the place that he previously occupied. If we are to get out of our economic difficulties we shall only get out of them if both sides of industry try to understand the other's point of view and pull together. One man who could have done the job before he sold himself was the Chancellor of the Exchequer.
Business men feel that this tax has been imposed rather against the better judgment and the better will of the Chancellor of the Exchequer in response to the demand of the Minister of Health. The only explanation I can give is that every time hon. Members opposite have to consider something that is particularly disagreeable economically, they are scared of 1931. I remember the Foreign Secretary saying, "I shall never be a MacDonald" when reference was made in this House to a Coalition. This tax has been imposed because hon. Members felt that to offset the increase in the price of bread and in the cost of the Health Service something had to be done against hon. Members of this side of the House.


I think it is the ghost of Ramsay MacDonald that has frightened hon. Members opposite. He is with them all the time.

Sir R. Acland: If sacrifices are being imposed on wage earners is it not right that they should also be imposed on profit earners?

Mr. Osborne: I agree, but what I am saying is that this tax is footling compared with the enormity of the problem with which we are faced. To try to justify it in terms of the export trade as we are asked to do is wrong because we shall not make the profits which the Chancellor says we shall make. Therefore, I shall have to vote against this Bill because this is a shockingly bad tax.

7.35 p.m.

Mr. Piratin: One of the complaints which the hon. Member for Louth (Mr. Osborne) made about the Bill was that it is "footling." It seems that what he really wants is a larger increase than the five per cent. which is proposed in the Bill. In that respect I am with him all the way. However, it is out of Order, of course, for back bench Members to introduce, by way of Amendment, increases in taxation. If that is what the hon. Member wants, we can get together and see what we can do at a later stage. The case the hon. Member made was that exporters will have to lose when selling to the United States. He quoted his own firm—I do not doubt his knowledge of what goes on in his own firm—and he should be the last one to concern himself with Profits Tax. The more he exports to the United States, the less will be his overall profits.
I support the Second Reading of this Bill, but I am not very happy about it. As the hon. Member for Louth said, £13 million is very footling, and if, as other hon. Members have indicated, it is really meant to be a sacrifice which the Government are imposing on the profit makers in order to balance the sacrifice which is imposed on the workers, then it is a very poor sacrifice. It follows devaluation, the purpose of which, we are told, is to facilitate exports to the dollar countries; and the purpose of the Profits Tax is to reduce the increased profits which will be made as a result of exports. There is a difference of opinion here between the hon. Member for Louth and

the Chancellor of the Exchequer. It remains to be seen who is right. If the hon. Gentleman is right the Chancellor's estimate of £13 million will prove to be unfounded, but time will show, and the hon. Member will have nothing to worry about, so he need not bother to vote against the Bill.
Among other things, the Bill is intended to delude many workers into believing that sacrifices are being called for from all sections of the community. But not all workers will be deluded by this. Reference has been made to the meeting yesterday of the economic committee of the T.U.C., which has refused to limit its demands to a sliding-scale basis. Obviously, they are not going to be deluded into thinking that the rich are making sacrifices equivalent to those of the workers. This is one of several steps taken in the last few weeks imposing burdens upon sections of the people or on all the people.
The devaluation of the pound was followed by price rises, and, as one hon. Member has said, the extra penny on bread will have to be paid by the old-age pensioner as well as by the rich man. In that sense it is equal, providing they both eat the same amount of bread; but from the point of view of their access to other foods, the old-age pensioner and the low-paid working man live mainly on bread and things of that kind, while the rich are very often advised to keep off bread for the sake of their health. They can afford to do so because they have access to other foods. [An HON. MEMBER: "Cake."] Yes, as Marie Antoinette suggested, they can eat cake.
Last week we saw the introduction of cuts, including those in the social services, and I think that before hon. Members opposite oppose this Bill they should think what they are saying, because when the other cuts were before the House they voted for them. In fact, on the first vote which took place last Thursday, they voted for more cuts. Had they wanted to oppose the Government in the other direction, they could have come into the Lobby with several of us who voted against the Government's Motion. The fact that they did not do so was ample evidence that last Thursday the Conservatives did not oppose the Government's cuts because they wanted to reduce them,


as we did, but because they wanted to increase them.
This week Conservative after Conservative, with one honourable exception, has stood up in this House and demanded—and I understand they intend to vote against the Bill—that this small increase in the Profits Tax, bringing a net Revenue of £13 million, shall be withdrawn. The Government said they intend to save £10 million out of the new prescription arrangements. Why did not the Opposition vote against that? The Government are going to save £7½ million out of the schoolchildren by reducing certain transport services and by increasing the price of school meals. Why did not the Opposition vote against that?
Earlier today one right hon. Member opposite—I think it was the right hon. Member for the City of London (Mr. Assheton)—entered into an altercation with an hon. Member on this side about whether or not there are two classes. The hon. Member opposite was claiming that it was not the Conservatives' fault if some people believe there are two classes, and he put the blame, if blame there be, on the Minister of Health. The Minister of Health may have many qualities, excellent and otherwise, but even he would be the last to suggest that he has created two classes. Two classes were created long before either he or I came on to this earth, and they were created by capitalist society—the kind of society which hon. Members opposite want to perpetuate. Yet they want to give the impression that they stand for the nation as a whole and that they believe the sacrifices must be equal. Last week they wanted more sacrifices from the workers. This week they are not prepared to sacrifice what one of their business Members actually says will ultimately be no sacrifice anyway because it will be "footling." Look how they are fighting about it, one against another.
It is claimed that these sacrifices are necessary in order that we may export our goods to the dollar markets. I claim that this is wishful thinking and that with all the efforts which may or may not be made in industry—and I do not know about that—our exports will not be increased, tax or no tax, and irrespective of any endeavour by British manufacturers, for the reason that the Americans are un-

likely to buy. Apart from the fact that we have to increase our exports in value by 44 per cent. to make up for the devaluation of the pound, American consumption is going down.
Take our all-round export figures. Our exports have gone down all round by 10 per cent. from the beginning of the year. The official figures, as indexed against 1938, are 156 for the first quarter of the year and 141 for the July-September quarter of the year, the third quarter. That is a reduction of 15 per cent., and on the index figure of 156 it is a reduction of 10 per cent. Our exports, therefore, have fallen by 10 per cent. since the beginning of the year. That is, of course, our exports to all countries in the world, and we must remember that in one or two cases the figures have actually risen. This decline is because of the world capitalist crisis which is developing and because consumption power is declining in capitalist countries. How can we have increased consumption power in countries where unemployment is increasing?
One hon. Member opposite was evidently hoping that we would emulate France and Belgium. In Belgium the numbers of unemployed amount to the equivalent in British terms, allowing for the difference in population, of over two million. No one wants to emulate that. It is true that Conservatives would like to have what they sometimes call in their papers—the "Economist" for example—a "modicum of unemployment."

Mr. R. A. Butler: indicated dissent.

Mr. Piratin: All right, if the right hon. Gentleman does not accept the "Economist," then the "Financial Times."

Mr. R. A. Butler: indicated dissent.

Mr. Piratin: What does the right hon. Gentleman want? The "Daily Express" No? What is his paper? One of my hon. Friends suggests "Comic Cuts." The Conservatives sometimes speak of "a modicum of unemployment." A few weeks ago the "Economist" was working out, with other papers, that this unemployment figure would hover just around the 1,500,000 mark. It should not go beyond that said the "Economist"; that would be a sufficient amount of unemployment to create an inducement for the workers and an incentive in industry.

Mr. Osborne: What we Conservatives do not want and do not intend to have is 10 million in concentration camps, unemployed or not.

Mr. Piratin: Now the Conservatives are blaming the Government for concentration camps. The fact is that they are opposing the Government's Motion, and that must be one of the grounds on which they are opposing it. It is not my Motion; I endeavoured to put down an Amendment, but it was ruled out of Order.
Consumption in the United States is going down. A few weeks ago, when we debated devaluation, some hon. Members tried to point to increased production figures in the United States for one month. They can now look at the figures again and see that unemployment is rising once again in the United States. May I remind the House of what happened at an earlier period and in a former capitalist crisis? In 1929 this country exported to the United States £62 million worth of goods, and in the following three years that export value went down from £62 million to £39 million, £26 million, and £20 million by 1932. When the slump strikes the United States, as slumps are striking other countries, they will buy not more but less. Is there any business man opposite who thinks for a moment that the United States encouraged us to devalue the pound in order that we should be able better to compete with American manufacturers in America? They did not encourage us to devalue the pound for that reason, and it is therefore unlikely that we shall find markets in America to which we can export our goods.
In fact, all the Government are doing, on the basis of this wishful thinking, is to place the burden of the coming crisis on the workers, and it is the low-paid workers, the pensioners and those in receipt of allowances who are now suffering the greatest hardship. In those circumstances, we suggest that we should give them higher wages and raise the pensions. Immediately we get an outcry of "inflation." I want to ask the House this question. The minimum wage of the railwaymen is £4 12s. 0d. in the country and £4 14s. 0d. in London, and there are 130,000 of them at that rate of pay. If the railwaymen were to get the extra 10s. for which they have been asking for some

time, would that create inflation? If any hon. Member in this House thinks that would create inflation, then all I can say is that he has never lived at that rate or, if he has—and I know some of my hon. Friends on this side of the House have—then he has forgotten, to my deep regret.
If he has not forgotten, what is the case? Two weeks ago a neighbour of mine came to see my wife. She said to my wife, "You can have my meat ration." My wife asked her whether she had gone vegetarian, and she said, "No, I cannot afford it." I could hardly believe that when I heard it, because the House knows how small in value and in quantity the ration is, but I have since discovered that this is the case in many places. How often have we heard Labour Ministers and Labour Members of Parliament priding themselves—rightly—that in these years since the mar more liquid milk has been consumed by working-class children than before the war, when they knew of nothing else but tinned milk? Today less liquid milk is being consumed in many working-class homes.
These are facts. Is it not also the fact that when an egg allocation is made many working-class housewives cannot take it up at 4d. an egg, because they cannot afford it when they have three or four children? And those eggs are very important for those children. Every hon. Member on this side of the House, without exception, knows that what I am saying is true, and that these circumstances are growing. Moreover, I have not included the circumstances of such as may be unemployed, if only for a period of a few weeks.
Now I come back to inflation and the railwaymen. If the railwaymen got an extra 10s a week, what would their wives do? A railwayman's wife would not buy a new motor car; she would not even buy herself a new mink coat. She would take up her meat ration; she would take up her liquid milk allowance; she would take up her egg allocation; and she would buy her little boy a new overcoat this year, since he has not had one these last two or three years. That is not inflation, for all these things are in the shops. This would not create one iota of inflation. When hon. Members on the other side of the House—and sometimes hon. Members on this side of the House—talk so easily about inflation,


they are talking of it in a bourgeois way, and not talking of it, as I am, from the working-class point of view. A few extra shillings a week—

Mr. Deputy-Speaker (Major Milner): I do not quite see how the hon. Member relates his remarks to the increase of Profits Tax, which is the subject of the Bill.

Mr. Piratin: All that I am trying to show is that I want the Profits Tax reviewed at a subsequent date, and I am trying to show where the money should go if the Profits Tax were increased. It is a very good idea.

Mr. Deputy-Speaker: It may be a very good idea, but it is rather too remote, I am afraid, from the Bill.

Mr. Piratin: With all respect to you, Sir, I would point out that during the Debate other hon. Members have been going very wide indeed, and if you will allow me latitude to finish this point, I shall come back in a moment to the main point we are discussing. I was about to conclude, in any case. I was just saying that this question of inflation will not be solved by further unemployment, and I was asking how it could be resolved by this one Profits Tax increase; and I want to suggest that now is the opportunity for taxing profits substantially, and not in the small way proposed in this Bill, which proposes to increase Profits Tax on distributed profits by 5 per cent.
Let me give some figures relating to the possibility of taxing profits. According to the official rates in the White Paper, company profits in 1938 were £540 million. In 1946 they jumped to £1,200 million, in 1947 to £1,390 million, and in 1948 to £1,640 million. Thus in 1948 they were over three times what they were in 1938. Those are company profits. I should like to explain to the House that I have extracted these figures as against the overall profits which are given in the White Paper of some £4,000 million. The reason is that those profits relate to rent, interest and dividends, and they include very often returns at very low rates, and are not related to company profits. These figures are roughly about one-third of the overall figures given in the White Paper. They are company profits; and that is the particular section of profits with which this

Profits Tax is concerned. Thus their profits have increased since before the war by three times. No one has claimed that the workers' wages have increased by three times, and those figures are very important.
Now let us look at certain other figures. Here I have a very important revelation to make of a fact which sometimes has been overlooked. The total of rent, interest and profits, we are told, was in 1938, £1,950 million; in 1945, £3,240 million; and in 1948—the last year—£4,070 million. I know that figures are difficult to follow, but I ask the House to follow the figures carefully to see what is involved in my argument. The gross increase from 1945 to this year was £830 million—gross profits; that is, rent, interest and profits.
Now I ask the House to watch these other figures. We hear a lot about taxation, reducing these to a much lower figure. We hear a lot from Government spokesmen about the redistribution of wealth. I ask the House to observe this figure. In 1945 net profits were £1,860 million. In 1948 net profits were £2,930 million. I ask you to note, Sir, that the net increase in those four years was £1,070 million. Let me remind the House that I gave just now a gross increase of £830 million. Therefore, the net increase actually left in the hands of the profit makers was £240 million in 1948—£240 million more than in 1945. That £240 million is the very least which the Labour Government could have taken by way of various forms of taxation from the profit makers—the very least; and today we are presented with a Profits Tax Bill which proposes to increase Profits Tax to bring in a mere £13 million. I am giving figures which would increase that some 20 times.
I want to take just one case, and I do this because when I spoke for a minute or two on the Money Resolution last Thursday night the hon. Member for Edgbaston (Sir P. Bennett), whom I am glad to see in his place, interrupted me to say he would refute my figures next week—that is, today. Before he comes to that, and before I come to my interjections while he is speaking, let me give the House just one individual case which, in a way, typifies the picture I have given in relation to the White Paper figures. The firm of Joseph Lucas, Limited—and the


chairman is the hon. Gentleman opposite—in 1947 made £2,400,000 trading profits. In 1948 they made £3 million trading profit—an increase in this very gloomy year of Labour Government of some £600,000, or precisely 25 per cent. in one year. Not bad under a Labour Government. The hon. Gentleman did not do better under a Conservative Government.
In both years—and on this the Chancellor of the Exchequer would congratulate the firm—in both years the dividend on the Ordinary shares remained stationary at 17½ per cent. It was quite evident that in the second year, 1948, the company could have raised it to nearly double that amount; but no: those people are patriotic and they were satisfied with donating to their shareholders merely 17½ per cent., and all the rest was put into reserves one way or another—different kinds of reserves. We know how companies organise reserves. Here is an excellent case in which, if the hon. Gentleman opposite were indeed patriotic, as only Conservatives claim to be in our country, he would forgo immediately 25 per cent. of his profits and give it as some sort of conscience donation to the Chancellor of the Exchequer—if he wanted to set an example.
On the contrary, what did the company do. They actually have the temerity—I have a feeling that the hon. Member for Edgbaston is going to speak after me—to come to this House and ask to be allowed to make greater profits than ever before. In the figures which I gave last week—I will repeat them in summary form—I showed that in the last few weeks since the pound has been devalued the Ford Motor Company, which had transactions with the hon. Gentleman's company, as I know, were selling a certain motor car to the United States—the Anglia motor car—at £63, or 18 per cent. more than they were six weeks before. That is very good business and very poor patriotism. If the hon. Gentleman maintains that that is the quality of his party, we all hope that the public will realise where his party stands when the next Election comes.
I want to say a few kind words to my hon. Friends on this side of the House. I think that many of my hon. Friends were here when a number of hon. Gentlemen opposite were making their contributions. We should all take a lesson

from what some of them said. We on this side sometimes behave very easily in allowing further burdens to be placed on the workers, and we are so neglectful of their interests, not perhaps deliberately, as to think that that is the best way out. It is doubtful whether this footling £13 million will ever be realised.
An Amendment has been put down by hon. Gentlemen opposite to reject it completely. Look how they vote for their class. They know which is their class. Member after Member opposite who has spoken has referred to "my company" and "I speak from personal knowledge." Have they ever worked at the bench or been to the labour exchange? No. Their personal knowledge is of their own firms. They speak for their own class. I have already intimated that I will vote for this Bill, and I hope that we shall speak for our class as hon. Members opposite speak for theirs.

8.3 p.m.

Mr. Walter Fletcher: I fear that I shall be a serious disappointment to the hon. Member for Mile End (Mr. Piratin) because I am not the hon. Member for Edgbaston (Sir P. Bennett). I should like to correct him on one point in his interesting speech in which meat, mink and milk seem to have got mixed up. He talked about "donating" to shareholders. Shareholders who risk their capital do not get "donations"; they get a dividend for risking their capital.
The speech of the Chancellor of the Exchequer when he first introduced this extra taxation placed the reasons for it quite firmly. It was to be a disinflationary measure. It was to be a mild, necessary, financial aperient. It was to be a disinflation of the too great profits that might arise from devaluation. This afternoon that argument has been completely refuted in the interesting speech of the hon. Member for Sowerby (Mr. Houghton), who speaks with great authority from the position he holds and with great knowledge of these matters. There we got the real truth. I should like to offer him an appointment as President of the "Gaff Blowers Club" because he most certainly blew the gaff this afternoon.
This Measure—to use his own words—is introduced to "placate the trade unions." That is a poor compliment to


the trade unions; and as the great majority of the inhabitants of my constituency are trade unionists and workers, I think that he was taking a very poor line. If we are to impose taxation, not because it is economically sound to do so, but to placate the trade unions, we are imposing a tax for an entirely wrong and uneconomic purpose, and we are, in the eyes of the rest of the world, taking a step which will be almost fatal. I was disappointed when I got this Bill from the Vote Office.

Mr. Orbach: I wonder if the hon. Gentleman would be prepared to deny the arguments of his friends on his side of the House when they declared that this tax will damage trade?

Mr. Fletcher: I must be allowed to make my speech in my own way. I thought that there was a grave omission in the printing of this Bill because the sub-title of it should most clearly have been "The capital import disincentive Bill." No action taken by the Government could be more likely to have a fatal effect, particularly on American capital which it is the Government's own policy to try to induce to come into this country.
There is, in my view, not the least doubt that in a short period of time—one or two years—various forms of aid which America is giving to us at present will dry up. We have been given notice so far as that is concerned. What are we to do in substitution for that aid? We shall certainly not have closed the dollar gap by then. We shall want to have a more permanent partnership by attracting the inflow of American capital. Does anybody really believe that if we adopt as our theme song "Dilly, Dilly, Dilly, come and be killed" we are going to get the American duck to swim the Atlantic? This is a tax aimed at industry and investments in industry here, not on economic grounds but really by people who want to placate the trade unions, which in itself will not succeed because the trade unions are much more sensible than that.
Hon. Members opposite should remember that there is a great deal of competition for American capital. France has passed legislation by which if America invests capital in France or French colonial development, it shall be repaid

at any moment at the rate of exchange at the time when it went into the country. They are producing incentives for capital to come in and help develop their country. Germany is competing in every possible way to get American capital, which it needs so badly. Now what are we doing?—we with whom the Americans have a much greater affinity, we whom they desire to help and whom they regard as a stabilising element in the world.
The Government produce this Bill without thinking at all what its effect is going to be outside, because hon. Gentlemen opposite, for reasons which I have demonstrated to be unsound, attack, or appear to attack, one side of the industry in order to placate the other. They deliberately introduce without sufficient forethought, an act which will have a completely bad effect on the inflow into this country. I noticed when the Economic Secretary was speaking that there is a new inhabitant on the Front Bench. There seems to be a sort of political "Harvey" there and Ministers seem to turn with fear to this new political "Harvey" and refer to him, because he has greater knowledge and authority than any other Minister. Hon. Members, opposite take short maniac rushes, instead of thinking out carefully what they are going to do. Of all the ill-thought out acts which this Government has taken, I believe this to be the silliest.
I do not happen to be enormously impressed with the fact that the extra 5 per cent. will do a huge amount of damage. I am quite willing to say that I think the damage will be of a certain measure, but not fatal. But if the extra tax is being put on for the motive which was given this afternoon, then the effect will be, not only once more to create disunity in this country, which is a thing we ought not to do, but, what is much more important, to drive away the flow of capital from America and other countries which we must get within a short time as a substitute for the aid that will soon cease.

8.11 p.m.

Mr. Henry Usborne: I listened with great interest this afternoon to the fascinating and, I thought, brilliant speech of the Economic Secretary. I say at once that I have every intention of supporting the Government in the Lobby this evening


if the House divides, but I think I ought to say, in all honesty, that I propose to support this Bill, not substantially for the reasons given by the Economic Secretary but for quite other, and I think much more important, reasons. If in exposing those reasons as I understand them I also qualify for the "Gaff Blowers' Club," then I am perfectly happy to join with a great many other hon. Members.
There is current a theory which I feel sure most hon. Members will have heard very often, if they can recollect their nursery days. I have recently heard my wife tell my children that it is wise to eat the crusts of bread left on the plate because it will make their hair curl. Now, I do not happen to be a nutritional biologist, so I do not know whether there is any connection between eating the crusts and curling hair; but I never interrupt, because I find that that argument persuades the children to eat the crusts, and as I do not believe in waste I think that is a good thing.
For similar reasons I believe that the argument adduced from the Government Front Bench was also a good thing. But I believe that the real reason why this increase in the Profits Tax had to be made was precisely because as a result of devaluation burdens were imposed, the bulk of which fell on the working-class, and it was therefore necessary in common equity, and as a method of placating the trade unions, immediately to impose some burden on dividend earnings as well. I do not think that there is anything wrong in that. Indeed, I think it is absolutely right. If this is, as alleged by the hon. Member for Louth (Mr. Osborne), a footling little tax, then the Government have probably been much too gracious and the Opposition have got away with this very easily indeed. The fact is, something had to be done at once, and I believe that the Government have at once done the right thing.
If hon. Members opposite who, as they appear to do, go on for hours very cleverly arguing against this Bill, would think the matter through, I am sure they would appreciate that if by increasing the Profits Tax by a mere five per cent. organised labour in this country can be placated, then the industrialists have got away with it very cheaply indeed. Of course, it may seem hard to some of them. Many industrialists seem to have got the

bee of taxation so firmly fixed in their bonnets that they cannot think squarely about it at all. If they thought clearly it seems to me obvious that if, as a result of a mere five per cent. increase on the tax on distributed profits we can keep down the costs of labour, then the business men have got a very good deal.
Now, in the interests of the economy of this country as a whole it is, of course, necessary to keep prices down. The most important factor in calculating the price level of goods is undoubtedly the cost of the labour employed, so what on earth have the Conservatives got to grumble about? Indeed, this is the sort of tax that, if they really want to get the benefits they desire most cheaply, will get it most effectively. What they have to grumble about I have not the slightest idea; unless it be this.
I said a moment ago that most Conservatives, and also a lot of business men I know, have so got in their bonnets this bee about the heavy burden of taxation that they cannot and do not think clearly about it at all. They may be very able business men, but when it comes to calculating the burden of taxation and its effects upon their businesses they seem to be wholly unreasonable. They spend much of their lunch-times moaning about the terrible times that they are enduring, though many of them have got full order books, and then, when they have got this dreadful dirge off their chests they spend most of the afternoon with their accountants seeing how best to evade the tax. Now what is wrong—and I want to say this to my own side—is that it is a bad thing when in industry managers, directors and proprietors of firms spend so much of their time trying to evade taxation. It is wrong to try to evade taxation, but it is worse when people spend so much of their time attempting to do so—and the fact is nowadays that is what is happening.
To many of my hon. Friends, and particularly to such as my hon. Friend the Member for Gravesend (Sir R. Acland) I want to say this. I think a perfectly good argument can be, and is made out daily for the progressive reduction of dividends obtained by the owning of property. That is the way things are moving, and we must face it and legislate for it. Nevertheless, we ought also to


realise that so long as there is a large slice of the industrial capacity of this country in the hands of private ownership we must not forget the psychological way in which such people react to taxation. If we over-rush and over-do what has to be done, if we try to do it too fast, we may defeat our own object.
Two wars in a lifetime have accelerated a process which was inevitable in any case, so that we are now in danger of being compelled by force of circumstances to endeavour to do some things slightly faster than the human frame can bear them. We must cater for human beings as we find them, and for the psychology of men as we know it to be. Whereas I am sure it is right progressively to reduce the earnings of mere property ownership, I think there is a limit to the speed with which such a thing can be done. Just now I believe that we are very near that limit of the burden that those people can bear. If it is increased much more—and there is undoubtedly a case for increasing it—it will simply be found that those people wilt spend more and more of their time and energies worrying about what is in reality absolutely trivial. However, to them it is not trivial, nor is it trivial for the country to have those people, who for the most part are very capable business men, spending so much of their time worrying themselves so silly. The country needs their undivided energies to be available for their jobs.

8.19 p.m.

Sir Peter Bennett: The hon. Member for Mile End (Mr. Piratin) attacked me, my companies and my habits, and dared me to give him some particulars. However, he is not here—

Mr. Mellish: In all fairness, although I do not support the Communist Party, I must point out that the hon. Member did apologise for having to leave the Chamber. He said he was very anxious to come back and be in his place when the hon. Gentleman spoke.

Sir P. Bennett: Well, I have been called and I shall go on with my story. If he misses it, that is his look out. He drew a red herring across the trail, because on Thursday night when the Money Resolution was debated he made certain state-

ments which I contradicted, and I said that I would provide the correct information if I was fortunate enough to catch Mr. Speaker's eye in this Debate. He did not mention those figures again tonight, but he attacked my companies and suggested that I was in some way to blame because the companies of which I am chairman—I do not own them; I wish I did—made considerable profits. The hon. Member spoke of millions, but he omitted to tell the House that the work is done in 20 different factories and takes 35,000 workpeople to do it. If we divide the profits by 20 factories, or 35,000 workpeople, it will be seen that the amount per worker is very small indeed.
Last week the hon. Member made a statement that the Ford Company were exporting motor cars and that their price for the Ford 8 in the United States was 1,420 dollars, which at 4 dollars to the pound makes £355. He said that the same motor car has now been reduced to 1,170 dollars, a reduction of 250, which, with conversion at the new rate of 2.80 dollars, came to £220. He went on to say that Fords are getting 18 per cent. over the former price. He is quite wrong in his facts and he is even more wrong in his presumptions. I know that HANSARD referred to a Ford V-8, when in fact he was speaking of the Anglia; there are no Ford V-8s being sent to U.S.A. The Anglia list price in New York was 1,398 dollars before devaluation and 947 after devaluation so the reduction is 451 dollars instead of 250.
In his contention that the Ford Company are getting 18 per cent. over their former price, he assumes that they are getting the full United States retail price, whereas what they are getting, as I tried to tell the House, is the price from the factory f.o.b. None of the other elements in the United States list price, freight, duty, local taxes and distribution charges accrue to the English company. All they get is the f.o.b. price, which has remained unaltered since devaluation. And so I think I have knocked on the head his suggestion that the company are making 18 per cent. more.
The Ford Company naturally very much resent the suggestion that they are profiteering, and they have authorised me to say that the English Ford Company have not sought to profit and have not,


in fact, covered their full costs on dollar export business in North America. In spite of that, they are very proud of what they have done. They have supplied 18,230 vehicles at an f.o.b. value of over 10 million American and nearly 4½ million Canadian dollars. They feel a little aggrieved when an attack of that sort is made, and I for my part am pleased to be able to justify what I said last week.
I thought I would also find out what the other manufacturers were doing. I ascertained from the Austin Motor Company that before devaluation they did not get sufficient to cover their overheads, let alone make profits. Following devaluation, they are putting up their ex-works prices and reducing American selling prices to cover part of their overheads, but they are still not getting any profits. The hon. Member for Mile End said that no doubt I would mention something about the rise in the cost of materials. He said that we know perfectly well the cost of materials is only a fraction of the normal cost of a motor car, much of which is labour and profits.
It may interest the House to know that the Austin Motor Company have authorised me to say that the A-40 "Devon" car exported to the United States costs over seven times as much for materials as for productive labour.

Mr. Piratin: When the hon. Member said that the Austin Motor Company pay seven times as much as they did formerly for their materials—[HON. MEMBERS: "He did not say that."] When he says that a motor car costs seven times as much for materials as far productive labour, will he say whether these materials they buy to build the cars come from firms like Lucas who have already obtained ample profits?

Sir P. Bennett: I dealt with that question a few months ago. Of course it does, and that is one of the things we are being urged to do—to specialise and concentrate outside; to buy as much as we can from specialists to keep costs down, because that is how America does it. I took the trouble to ascertain the position of the Hillman Company. They do not make their full factory costs on the cars they send to the U.S.A. If they could export to other markets, they would

be making a better contribution to their business than selling to America.
The Morris Company have made losses on all the cars sent to the U.S.A. They are using devaluation to reduce prices to make additional sales in the United States. The United States provides the least profitable business, and they would be delighted if they could be relieved of the necessity of having to send cars there and could supply them in other markets.

Mr. Usborne: The hon. Member says that the Morris Company and the other companies are exporting cars to America and making a loss. That can be confusing. What I want to know is whether the companies make less net profits at the end of the year as a result of sending cars to America.

Sir P. Bennett: Of course they do. The hon. Member knows perfectly well that if a company cuts its overheads from one place they have to put it on others, which means someone else is paying. He must study the balance sheet for himself. All I want to say is that the British motor trade, instead of being criticised, should be commended for tackling the most difficult job in the world. I am not giving my own views on the matter, because Mr. Paul Hoffman has expressed surprise that we are putting automobiles in the front of our export programme to the United States, in view of the fact that America is the largest and cheapest manufacturer in the world. He has expressed surprise that we are tackling the problem.
When hon. Members talk about a little extra profit, Members must remember that it is not a case of profits for the motor manufacturers, but that they are exporting to the United States because they are asked to do so in the national interest. If they could please themselves they would sell in this country and in the other markets overseas.

Mr. Mellish: This is very interesting. If I understand aright the argument of the hon. Member—

Sir P. Bennett: It is not an argument—these are facts.

Mr. Mellish: Then, if I understand aright the facts which the hon. Member has stated, motor car firms are losing money by exporting to the dollar countries. As, however, last year they made


what must be regarded as a colossal profit—with a 17½ per cent. dividend and a great deal going into reserve—are we to take it from that that the profit was made from sales of cars to the home market?

Sir P. Bennett: I have been giving figures connected with the production of motor cars and the hon. Member is trying to talk about something else entirely. There is no connection whatever between the different matters. The hon. Member dragged in the red herring again: I have dealt with it, and am dealing with facts which are incontrovertible.

Mr. Piratin: rose—

Sir P. Bennett: No, I have given way already, and I am now giving my own summing-up.
The general question of the Profits Tax has been dealt with very thoroughly and I agree with a great deal of what has been said on this side of the House and with some of the things which have been said from the benches opposite. The hon. Member for Blackley (Mr. Diamond) made the suggestion that there was irritation because of the small additional tax. Of course, it is not caused by this small additional tax. It is no good people trying to ride it off and say that irritation does not exist. There is great, growing depression among the business men to whom the Chancellor is appealing for co-operation. Apart from the actual effect of the increased tax itself, the whole attitude of mind of the Government is resented. Anybody who heard the tone of voice of the Chancellor when he announced the extra tax will understand the reason for this resentment. The Chancellor, like myself, grew up on instruction from the Old Book, and he must know as well as I do the saying about muzzling the ox which grinds the corn.
Business men and industry will continue to do all they can in the national interest. I have given the figures for the motor industry. Other industries are doing the same. My hon. Friend the Member for Louth (Mr. Osborne) has accepted business at a loss in order to carry out the wishes of the Government. We shall continue to do so. But remember, it is being done in spite of the Government and not because of them, and it is not good that that attitude should

grow. When wholeheartedness and enthusiasm are taken away from any team, very often the result is adversely affected, as those who have played games will know.
We now have the present action of the Government in addition to what they have already done and the way in which it has been put over. We have had from them no suggestion of co-operation, but rather the attitude, "We are going to hit you in advance in case you do anything." The other day this quotation was sent to me, and I give it to the House:
When I was a boy it was considered not only safe but honourable to create an estate, so that almost all men of standing wished to add to their possessions and felt a certain dignified honour in prospering, but now we must apologise for any success in business as if it were utter violation of the moral law, so that today it is worse to seem to prosper than to be an open criminal.
It is customary when giving a quotation to name its authorship. That was written by a gentleman called Isocrates, a philosopher who lived some 500 years before Christ and who witnessed the beginning of the decay and breakdown of ancient Greek civilisation.

8.33 p.m.

Mr. Mitchison: I should like, first, to correct the hon. Member for Edgbaston (Sir P. Bennett) and to advise him to get the date right next time he refers to a Greek philosopher. These misquotations and mistaken references to the classics which come from the Opposition benches have to be corrected too often from this side of the House, and I trust that the standard of education in that quarter will be improved.
What we are considering is not the moral rectitude of the Chancellor of the Exchequer, who I think is thoroughly able to look after himself, but who happens to be absent tonight; and I have been sorry to hear these attacks upon him by the makers of pyjamas in Lincolnshire and motor cars in Birmingham. I venture to think that the British people have their own views on the moral probity of the Chancellor of the Exchequer and I share with them the conviction that he is a good and upright man and that those who bark and sniff at him in this way do their own cause more damage than they are likely to do to his reputation.
On the matter that we have before us, we are considering the question of in-


creasing the Profits Tax by one-fifth in the case of distributed profits. We are considering that for the reason that we have to take measures to meet, not the devaluation of the pound, but the inflation that is already in evidence and which may perhaps be increased by that devaluation. That is what we are considering and that is why we are considering it. The first thing that occurs to me is that we have most obviously evidence already that there have been substantial increases recently in company profits available for distribution and that, prima facie, that is a matter of inflation, which might properly be corrected.
I do not found myself merely on one company or two companies. I have looked at the figures collected in the statistical part of the "Economist" about the 799 companies which happened to report their profits and the amount of Profits Tax they paid in the months, April, May and June of this year. Those figures are given by comparison with corresponding figures in the previous year. What struck me, and I believe will strike other hon. Members, is that there was an increase in the gross trading profits of those companies between the year on which they were reporting and the previous year, which itself amounted to more than the Profits Tax they had had to pay in either year. The Profits Tax so far had been less than the increase which had come to those companies between those two years.
The question is why they had had that increase in their gross trading profits. When we are dealing with 799 companies simply because they happen to report during that period of the year, we cannot put it down to the particular virtues of any company or people connected with it, and we rightly attribute it to a general tendency for profits to increase, a tendency which I should think everyone would recognise was of an inflationary character. If we get an increase of that sort, we get an inflationary system and there is a strong case on that ground alone for increasing the Profits Tax which so far, apparently, has been insufficient to take up that purely adventitious increase in gross trading profits.
That is purely an economic case, for this measure to meet this inflation, but the increase has to be considered on other grounds, and I entirely agree with hon.

Members on both sides of the House who have emphasised that what we have to consider tonight is not only the financial and economic aspect, but also the moral aspect. Believe me, I am not a trade union official; I am, as an hon. Member kindly remarked, a lawyer by profession. I am here as a representative of a mixed constituency which contains, as usual in this country, a majority of people who are working for wages and those people, out of their wages, have to meet their ordinary daily expenses. It is on them that matters like an increase in the price of wheat, or anything of that sort, will fall. This is not the first time they have had to meet comparatively small increases, but nevertheless increases, in the cost of living.
I say "comparatively small increases" because I heard the right hon. Gentleman the Member for Saffron Walden (Mr. R. A. Butler) attribute to this Labour Government or its policy such increase as there has been in the cost of living. It is very easy indeed to meet that kind of case and if I may attribute to the right hon. Gentleman both a tongue and a cheek, I think that on that occasion his tongue was slightly in his cheek. The answer obviously is that if this is a matter of policy, then to what policy must we attribute the far larger and far sharper increases in prices that occurred at the end of the 1914–1918 war and the subsequent increases of the same order which occurred from time to time during the disordered economy of the six years after the first war under Governments which were either Conservative or dominated by Conservatives?
The answer is to be found in the statement made by the right hon. Gentleman the Member for Woodford (Mr. Churchill) one year before the end of the war—a statement which was put to him the other day in this House and which was quite properly not denied by him because it was made—that he thought that at the end of the war this country would be bankrupt. It is impossible to say that the Leader of the Opposition had the faintest idea one year before the end of the war that there would be a Labour Government in power at the end of it. No doubt he hoped, and I think we may assume that he expected, that he and right hon. Gentlemen opposite would be in power at the end of the


war. Notwithstanding that, he made that statement. With all respect, it does not seem to me to accord with the highest standards of political morality to attribute to a political party or a policy something which was quite fairly foreseen a year before the end of the war as inherent in the nature of the difficulties through which we were going.
I spoke of a comparatively small increase and I hope that I have justified that statement; but, after all, a comparatively small increase bears hardly on those people—and we have to deal with the great mass of people in this country, our own fellow citizens, men and women—to whom we have been saying, and rightly saying, that we will do all we can to preserve a fair share of whatever benefit may be going and to see that there is a fair sharing of any burden. Speaking as a Member of this House, thereby representing a considerable number of these ordinary people, and speaking in no other capacity, I find it exceedingly hard, in fact quite impossible, to justify the cuts which were put before this House the other day if they are to be confined solely to cuts in matters of what the people eat, cuts in matters of Government expenditure and the like, and if at the same time I know that the Profits Tax has in the past been insufficient to mop up the actual increase in profits which happened adventitiously to those particular companies and their shareholders.
I, therefore, say that as a matter of moral right we must be able to say to the people of this country, when they are being asked to bear their share of the burden, that other people will also be asked to bear it. I regard this very moderate Measure, this small increase, as certainly not too large to discharge that obligation in some measure. I should like to say this about it. Of course, it is not a perfect tax; we cannot have a perfect tax or a perfect fiscal system—there is no such thing, and there never has been—but it is pretty good justice, and just as near as we can get in practice by one single Measure introduced between Budgets. It is not a matter to be deferred until the next Budget. The price of bread has gone up already. Inflation and devaluation are present matters. They do not bide by our Parliamentary timetable nor do they come

in accordance with it. I am certain that hon. and right hon. Gentlemen opposite would have been the first to accuse the Government of unwise delay, if they had not taken some steps immediately. Once those steps are taken, a Measure of this kind obviously is imperative among them.
I have heard hon. and right hon. Gentlemen opposite talking about incentives. I have listened to a good many discussions in this House about incentives, and I would say that men and women, whether they are rich or poor, whether they are shareholders or wage earners, respond to the same incentives. It is neither wise nor useful to offer to one set of people a whip and to others some attractive bait. Why is it always suggested in this House that the only incentives which can be given to business men are incentives of a pecuniary character directly affecting shareholders or directors? I do not regard business men in that fashion. I think they are better citizens and better people than some hon. and right hon. Gentlemen opposite seem to suppose.
It has been quite rightly said there has been a response by many business men on patriotic grounds to the appeal made in matters of this sort. So be it; I should not have expected otherwise. They, at any rate in that matter, understand the patriotic incentive. Then when we come to incentives for the people who do the managerial and manual work, it is never put from the benches opposite that this incentive should be in the form of higher pay or salaries. I cannot understand upon what grounds that difference is effective, and I should have thought any talk about incentives in a discussion on this Bill was somewhat out of place. It is simply a small measure of justice, a small attempt to make the burden rest fairly on all classes and all groups of the community.
I would add a word to what I heard said by the hon. Member for Sowerby (Mr. Houghton), that if that is not accepted on moral grounds, then it should be borne in mind that there are also reasons of expediency. We cannot go on expecting not merely the trade unions and their members but other workers up and down the country to hold their hands on wage claims unless we can satisfy them that no one else is getting any increase out of the adventitious circumstances, which is denied to them. I should have thought that was a matter which might well appeal to hon. and right hon.


Gentlemen opposite, who after all have the interests of the whole country to consider, just as much as we have on this side of the House.
This is a tax on distributed profits. There have been very many suggestions that in some way or another it would increase costs or interfere with the piling up of reserves. I entirely fail to see why. We have not only expert opinion that a Profits Tax does not increase costs, but I should have thought it stood to common sense that it did not increase costs. I have never yet heard any clear explanation of why it was supposed to do anything of the sort. So far as any case for it is put forward, it is not put on economic grounds but on matters of incentives and so on, with which I think I have already dealt sufficiently and with which I will not trouble the House any further. Therefore, on that ground, I can see no reason at all.
On the question of piling up reserves, first I cannot see how this increase can affect the matter one way or the other. Secondly, if it were to affect the piling up of reserves in any shape or form, then I fail to see how that process will affect the real investment in the country. It will simply mean that the actual, proper capital investment will be done by the Government instead of being done by particular companies more or less under Government direction as it is at present. For all those reasons, I think that the case which has been put against this increase in tax is a singularly weak one and that on moral, economic and social grounds, the increase ought to be supported by every patriotic Member of this House.

8.51 p.m.

Mr. Spearman: The hon. and learned Member for Kettering (Mr. Michison) has just admitted that he had not been speaking on economic grounds, so perhaps he will not be surprised when I say that I do not think that his speech really contributed very much to meeting the present situation. I should like to tell him that we oppose this tax not because it is a very heavy tax, because it is not, and not because employers are affected by it. He will find that if the Government had the courage to come forward with really drastic remedies which would effectively take inflation out of the system, we

should support cuts on all sections of the country very willingly indeed, because we know that if those cuts are not undergone now far greater cuts will have to be suffered later.
The hon. Member for Acock's Green (Mr. Usborne) appeared to think that business could get out of the present situation very cheaply by submitting to this tax. Of course, I would entirely agree that if this tax were going to solve all our difficulties, it would indeed be an easy way out.
It appears to me that there are three reasons for a Government imposing a new tax. First, the idea might be in fairness to the rest of the population to redistribute the burden. The hon. Member for Sowerby (Mr. Houghton) quoted a lot of figures from Dr. Barna which I shall study in the morning. I think from them he appeared to be saying that those businesses which had built up their capital and ploughed back a large portion of their dividends would be penalised, and those businesses would be favoured who dissipated their reserves.
I think that the fairest way of comparing the position of wage earners with those receiving dividends is to examine the White Paper on National Income and Expenditure, Command Paper 7649. According to that White Paper, since 1938 wages have gone up by 129 per cent. and profits by 44 per cent. or, after allowing for tax, wages have gone up by 116 per cent. and profits by 37 per cent., or, adjusting that for the change in the cost of living, wage earners are 20 per cent. better off and shareholders are 24 per cent. worse off.
I am not necessarily quarrelling with that redistribution of income, but I say that that shows that there is no need to inflict burdens on one section of the community because the shareholders have suffered more—

Major Bruce: Is it the case of the hon. Gentleman that the ordinary worker is now much better off, and has been for the last four years, under a Labour Administration?

Mr. Spearman: What I said was that those receiving profits were 24 per cent. worse off than in 1938 whereas those receiving wages, allowing for rising prices, were 20 per cent. better off.

Major Bruce: The hon. Gentleman agrees—

Mr. Spearman: I shall not give way again, because I have not got the time.
The second reason why the Government might bring in fresh taxes is in the national interest, but I think it would require far more persuasive speeches than we have heard tonight to convince the experts that, in conditions of dividend limitation, this tax is disinflationary. It is, as my hon. Friend the Member for Bury (Mr. W. Fletcher) said, a deterrent to the American investor in this country. The Chancellor's object in devaluation was to stimulate exports, and the price that had to be paid was the rise in the cost of living. In so far as it will detract from that stimulus to exports, to that extent we are paying the price of a higher cost of living for no advantage at all.
The third reason that might be put forward is that it is a sop by the Government to those whom they wish to appease—a tax which hurts some, helps none and will damage the economy of the country. Under this Government, we have gone through the whole series of expedients resulting in a series of crises. What is quite clear is that, however uncertain the Government were as to what measures they must take, and however long they took to make up their minds, they immediately settled on this tax. The country would feel a great deal more confident in this difficult time if it felt that the Government were making the most careful examination of the situation before they came to their decision. After all, when a doctor has to deal with a difficult case, he makes the most careful examination of a patient because he knows that only in accordance with a correct diagnosis can he prescribe the right treatment.
We are all agreed on the gravity of the situation today. We know that 80 per cent. of our dollar imports are not being paid for, that our costs are rising and that our balance of payments outside dollars is very precarious, while our reserves are not one-third of what they were in 1947. The Government claim that the economy of the country under Socialism is working very well, and that production is up by 30 per cent. If that is really true, and if we are doing as well as we possibly can, then indeed the outlook is gloomy. It is a question not of temporary cuts, but of permanent cuts. But I do

not believe that those figures are anywhere near correct.
When the Chancellor says that production is up by 30 per cent., I would refer him to the London Cambridge Index, which shows that production for the first eight months of 1949 did not exceed that of 1938 by 30 per cent. but by only 18 per cent., and that it exceeded that of 1937 by only 9½ per cent. Since then, there has been enormous technological changes, an increase of population of 6 per cent., full employment as a result of war destruction and so enormously more people at work.

Mr. Sparks: rose—

Mr. Spearman: I am sorry, but I cannot give way, as I have only got two minutes more.

Mr. Mitchison: The hon. Member has got all night.

Mr. Spearman: Those are the reasons why I ask the Government to consider how it is that things are going so badly. No doubt, it is partly because people are not working in the right jobs. The target in the Economic Survey for 1948 for redeployment of labour has only been half-fulfilled. It is still more because profits are now much too easy to get. Partly because of excessive Government expenditure, partly because of unrequited exports, we are selling things in return for the cancellation of debts. Also many companies are protected by allocations of raw material based on 1939. All this means that there is no inducement to export, to be enterprising and to cut profit margins.
Hon. Members opposite really ought to distinguish between those companies whose profits are due to great efficiency, and who, by taking risks, by hard work and enterprise and the cutting of their profit margins, have defeated their competitors and taken a bigger share of the business, and those companies which are getting big profit margins. What we want are conditions where profits are harder to get and are much more worth while when we have got them. Let us remember the dictum of Alexander Hamilton:
We have to take men as they are. If we want them to serve the public interest we must excite their passions.
Self-interest is not the only motive but it is one of the things which we must take


into account, and so far as we do not, we suffer. We are not doing anything like as well as we should, because the Government have failed to balance total expenditure and total resources. We know we must export much more and import less. Therefore, the inflation from which we have been suffering for a very long time is going to get more acute.
The Government must tax more or spend less, but, surely, the test is which is going to most increase the wealth of this country and provide security. That should be the real test. The Government policy is negative; it is not showing how we can do more, but only how slowly we can drift to disaster. We must get rid of inflation and the consequential controls on industry; we must restore competition, and thus expand production so that purchasing power need not be checked all the time. But that is not the Government's policy. Their policy is an entirely negative one; it is to allow purchasing power to rise on all sides, and then to attempt to check it by taxation. I should have thought such a policy could be likened to a Heath Robinson contrivance. This tax is one more expedient by which this Government hope to patch up the system, and to scramble through until the General Election.

9.3 p.m.

Mr. Assheton: Whoever speaks from this Box at about this time of day nearly always observes that it has been a very interesting Debate. On this occasion, I think one can say that with some truth, and that I have an added-justification for saying it in the fact that I understand there are still some hon. Members anxious to contribute to the Debate.
We have certainly had a series of enlivening speeches from both sides of the House, and I think that some of the contributions have been really valuable. We had very valuable contributions from this side—as well as that from my hon. Friend the Member for Scarborough and Whitby (Mr. Spearman) who has just spoken—from my hon. Friend the Member for Edgbaston (Sir P. Bennett) and from my hon. Friend the Member for Bury (Mr. W. Fletcher). My hon. Friend the Member for Tiverton (Mr. Amory) made a very interesting speech

as did my hon. Friend the Member for Stone (Mr. H. Fraser) and my hon. Friend the Member for Farnham (Mr. Nicholson).
I was interested to hear the hon. Member for Blackley (Mr. Diamond), who always argues his case carefully. On this occasion, he wisely confined himself chiefly to arguing that this particular increase was not really serious, but only very small. I thought him wise to stay on that reasonably firm ground. I also listened with interest to the speech of the hon. Member for Central Southwark (Mr. Jenkins). I am sorry he is not here at the moment, but perhaps I shall have an opportunity later to refer to his speech.
I was rather sorry that the hon. and learned Member for Kettering (Mr. Mitchison) sought to show the superior education which he had the advantage of receiving at a school which I also attended, and about which the Socialist ex-Vice Chancellor of Cambridge said recently that it was the only school that enjoyed the same standard of classical education as before the war. I was sorry that the hon. and learned Member took advantage of that. I am not quite sure that I know what he was worrying about. He seemed to be criticising my hon. Friend the Member for Edgbaston—who, incidentally, was at an extremely good school—and seemed to suggest that my hon. Friend was wrong in his dates. I do not quite know what the suggestion was, but certainly the philosopher referred to lived in the 5th century B.C. I have taken the pains to have it looked up and I find that he was born in 436 B.C.
However, I must return to the subject of this Debate. As it is very likely one of the last times that I shall have the opportunity, as Member for the City of London, of addressing the House in a financial Debate, I am naturally very glad to have this opportunity. This is a very serious time, and I want to make a serious speech, as other hon. Members have sought to do. I thought nearly all the speeches were valuable contributions in their way, though I was extremely depressed by the speech made by the hon. Member for Acton (Mr. Sparks), because he really believes that we on this side of the House are trying in some way to divide the country. I wish he would get that idea out of his head, because


I can assure him that there is not a word of truth in the suggestion.

Mr. Sparks: If the right hon. Gentleman and his hon. Friends do not vote against this Bill, we shall be more inclined to believe him.

Mr. Assheton: The hon. Member said that before, but the suggestion that he has been making all the time is that we on this side want the world divided into two classes. If we vote against this Measure it will be because we think it is bad for the people of this country and not because we think it is bad for one section of the community or another.
Perhaps I may be allowed to tell the House why I think this Bill is bad. I think the Profits Tax is a very bad tax. I was trying to think of other bad taxes in the past, and immediately I thought of the window tax which was imposed as long ago as 1697 and it had a very bad effect on the health of the people. It struck me when I was looking up the window tax that it was imposed for a strange reason, and it shows how history repeats itself. In the year 1697 Charles Montague, who was then Chancellor of the Exchequer, was trying to reform the currency of this country, and in order to deal with the clipping of the coinage and the depreciation of the currency he was forced to impose this window tax. The present Chancellor, in order to deal with the difficulties of devaluation, has also found himself involved in a very bad tax. The window tax lasted for 150 years, and I can only hope that the country will not have to suffer from the Profits Tax for so long.
Incidentally, Charles Montague was, according to historians, a man
whose ambition was great, his vanity excessive and his arrogance unbounded.
[An HON. MEMBER: Was he a Tory?"] No. He was a Whig. Apart from that, it was said of him by the Tories—and I tell hon. Members this because I do not want to suggest that this is an unprejudiced judgment—that he gave only good words and good dinners. The present Chancellor is interested in good words, but he is not interested in good dinners.
I am seeking to show that the Profits Tax itself is a bad thing. Profits, as my right hon. Friend the Leader of the Opposition observed the other day, are

not the same thing as profiteering. After all, a profit is, broadly speaking, something which is equivalent to the creation of wealth, and the ordinary trader sees in his profit and loss account the success or failure of his venture. He knows by that whether he is going backwards or forwards. I do not imagine that anyone, whether employer or worker, is particularly anxious to be associated with an unprofitable enterprise. Wage earners prefer to work in a profitable enterprise rather than an unprofitable one.
I suggest to the House that essentially a profit is a good thing and not a bad thing, and that to tax profits, as such, is a highly questionable proceeding because profits are the reward of those who have made savings. Although the hon. Member for Sowerby (Mr. Houghton), who always contributes to these financial discussions from his experience, told us that he did not believe it was desirable for companies to make savings through their reserves—that seemed to be his point of view—that is not a point of view with which we on this side agree at all. If there is any profiteering going on in this country I suggest that it arises chiefly from two reasons. One is the reason which was so well given by my hon. Friend the Member for Scarborough and Whitby—that there is an excessive amount of money in this country, due to lack of proper financial control and excessive Government expenditure. That is what my hon. Friend said and he is quite right.
The other reason is lack of competition, which is largely due to Government control. Normally, if a firm is making high profits, some other trader comes into the business and, by competition, profits are reduced to a reasonable level. Unfortunately, under our planned economy, of which the present Government are so proud, this very healthy process does not always take place, because the prospective rival who seeks to enter the field finds that he may not be able to get the necessary licences, permits, raw materials, buildings, and so on. If there are excessive profits at the present time—and I can quite well believe there may be in certain cases—to my mind they are chiefly the fault of the Government, and if they are due to monopoly that is certainly because the Government have not


taken some action about it and exposed it. [Interruption.] I am making a serious speech and I mean what I say.
The working of the tax itself is difficult to understand, if one reads the Bill, and perhaps I may make some reference to that on the Committee stage. I do not blame the draftsmen in any way, because if you are asked to draft something of this sort you are bound to produce a pretty grim draft. The main burden of criticism which has been made from this side of the House, and particularly by my right hon. Friend the Member for Saffron Walden (Mr. R. A. Butler), is that this tax is, in effect, a tax on reserves. There has been a great deal of argument about that this afternoon—serious argument—and I do not think that even the hon. Member for Blackley, who really understands these things perfectly, appeared to be convinced. Perhaps I may be allowed to quote from today's issue of "The Times," where, on that particular point, it says:
Although the profits tax purports to be a tax on distributed profits with a rebate in favour of undistributed profits, it is in its practical effect a tax on corporate savings.… That the tax is effectively a tax of undistributed profits is shown by the calculation, that even where a company decides to pay no dividend whatever, it is still liable to Profits Tax.
That is the point my hon. Friend the Member for Farnham was making so persistently this afternoon and that is the point which the hon. Member for Blackley does not seem fully to appreciate. This tax, in fact, is an absolute drive against building up reserves and we on this side of the House believe that building up reserves for companies is a very important and vital process.

Mr. Diamond: In proof of his case, the right hon. Gentleman has given as an example a company which makes no distribution at all, and in these circumstances the right hon. Gentleman says this company has to pay 50 per cent.—approximately 45 per cent. in Income Tax and 5 per cent. in Profits Tax. I agree, but that, of course, is a company which will not be in the slightest degree affected by the present Bill. I am not submitting that this point is entirely irrelevant, but merely telling the right hon. Gentleman that this is a company which will not be affected by this Bill at all because the Bill seeks only to increase the tax which goes on distributed profits.

Mr. Assheton: I am fully aware of that, but the hon. Member for Blackley still does not quite grasp the argument. What I rather resented was the way in which this afternoon he appeared to stand in his capacity as a chartered accountant, which I know he is, criticising my hon. Friend the Member for Farnham, who was making a perfectly good and sound point—exactly the sound point which is made in the article in "The Times" from which I have been quoting. I commend that article to the hon. Member, and I ask him to be good enough to read it.
My right hon. Friend who began the Debate from this side talked about the importance of reserves, and it is not necessary for me once again to stress it. The need for re-equipment the hon. Member for Abingdon (Sir R. Glyn) spoke about; and the chance to re-equip, which he said was so important, is, in fact, definitely prejudiced by this tax.

Mr. Mitchison: Why?

Mr. Assheton: I beg the hon. and learned Member for Kettering to listen to this because I am on a serious matter. I have left Isocrates. The whole burden of the Profits Tax—and I am not talking only of this 5 per cent. increase—falls eventually upon the reserves of companies. There have been hon. Members opposite who said there was no need to let that burden fall on reserves. "Cut dividends." That is what they have been saying. I want to meet the argument, if the hon. and learned Member for Kettering will allow me to do so.
I will remind him that my right hon. Friend said that directors of companies have some responsibility to their shareholders. So they have. If we look at the list of shareholders of any company, we shall find among them a great many small shareholders. It is all very well to say to directors of companies, "Cut dividends." That means that many very small shareholders, poor people, are going to suffer very much indeed.—[Interruption.]—Yes, there are plenty of people living on small incomes from dividends who would suffer very severely from a cut. Hon. Gentlemen opposite talk about equal sacrifice, but they are asking a certain section of the community to accept a considerable cut in their income. I tell them this. Those people, like the rest of the owners of income in this country,


are having their incomes reduced by devaluation anyway, just the same as anybody else. So I hope that hon. Members on that side of the House, when they make that kind of suggestion, will really appreciate what it means.

Mr. Chamberlain: rose—

Mr. Assheton: Moreover, if we reduce the profitability of capital we are going to make yet another attack on savings. It is quite hard enough to get capital for business these days—quite hard enough; but if we reduce dividends it is going to be harder still. The limitation on dividends makes it hard, in any case, but if a man's savings are not reasonably rewarded we shall do a great deal of damage to the capital structure under which we are living in this country.

Mr. Chamberlain: rose—

Mr. Assheton: I appreciate the anxiety of the hon. Gentleman to interrupt, because I feel it so constantly myself, but I am in the middle of an argument, and I would rather pursue it. The point I have just reached is this: if we make an attack upon the earnings of capital, we are going to find it very much more difficult to obtain capital. That is the point I was making.
The next justification which hon. Gentlemen opposite have put forward for this is that it is rough justice. I am always highly suspicious of anybody who says anything is rough justice, because it practically always means it is unjust. If it was really intended to find a tax which fell on firms which benefited by devaluation then, of course, this is the worst attempt that could possibly have been made. But really it was not an attempt of that sort at all. We have heard from several hon. Members opposite what was the real reason for putting this tax on. According to the hon. Member for Sowerby and the hon. Member for Acock's Green (Mr. Usborne) and others, the real reason was to appease the trade unions. That is what they told us. The Chancellor did not say that. Of course, one would normally attach some importance to what the Chancellor said of a proposal, but the back benchers said that was the reason, and we believe that there is something in it. I do not think it was a very clever way to try to appease

the trade unions. I think that they could have thought of something cleverer than this, and I do not think it has been very successful. At any rate, if it was the reason for introducing the Measure that it only did rough justice, then I do not think much of it.
Anyway, who is going to make these additional profits? Are not a lot of them rather illusory? Shall we not find that in very many cases the extra cost of raw materials which firms will have to pay will much more than offset the additional profits that they will get? Is it not really beginning to dawn on hon. Members opposite that it is not quite so easy to switch business from one country to another at a moment's notice? As one of my hon. Friends said to me the other day, it is not just a case of changing the address of the label on the boxes. It is a very difficult thing to develop a new market. If we want to develop a new market in a country like the U.S.A., we have to spend an enormous amount of money in building up our sales organisation in that country, and we cannot switch about from one line of trade to another or from one place to another without a great deal of difficulty. I should have thought that every possible encouragement ought to have been given to firms to do that, instead of discouragement.
The hon. Member for Acock's Green struck a useful note towards the end of his speech. He mentioned, for the first time from that side of the House, that the psychology of the employer might be worth looking into as well as the psychology of the worker. It is the case that employers and investors in general at the present time feel that they are being very oppressed by the present Government. [Interruption.] That is the feeling of employers and investors. Hon. Members who sit opposite may not think that is true. Pray believe me when I say, as a Member for the City of London, that that is the general impression. I think that it is a good thng to have some regard to that, just as I on this side pay great regard to the psychology of the workers.
I think that if hon. Members opposite do not take that into account, they may find that they are breaking up this Capitalist system under which we are living. [An HON. MEMBER: "It is breaking down already."] If we break it down


we are going to bring starvation on all our fellow citizens. Do not hon. Members opposite realise that all the benefits which they obtain now in this modern civilisation of ours through taxes are all coming out of profits? Where would the old age pensioners be and the Health Service be if there were no profits to support them? It is preposterous to suggest that we should break up this system under which we get such enormous benefits. I tell hon. Members opposite that that is just what the Government are doing by this sort of thing.
It is not because the increase in this tax is so startling that we are opposed to it; it is because it is one more illustration of the complete lack of understanding on that side of the House of the psychology of the people who employ workers and who engage in business. I am sorry that the Economic Secretary to the Treasury, in opening the Debate, made nothing but a political speech. He can make a very good political speech, and one day I may have the opportunity of hearing him on a public platform. I was sorry that he made one today, and I am not certain why he did. It seemed to me that he had no knowledge of the psychology of the employer. When I was first associated with the hon. Gentleman during the war at the Ministry of Supply—and he did splendid work there—it was his task to have continual contact with the workers, and I think now that it would have been much better if he had had greater contact with the employers and could have seen some of the difficulties with which they are faced.
The Economic Secretary said that this particular proposal was just one of the cuts. Really, to say that a substantial increase of taxation—not a large increase—was just one of the cuts, is quite nonsense. The only kind of cut that it might be called is an uppercut to employers. In the normal way of speaking a cut means a reduction in Government expenditure. This particular cut, as the right hon. Gentleman called it, was not one of the varied proposals put forward by the Prime Minister in his statement. It was put forward long before that as a quite separate proposal, and not as one of the cuts at all. We have now been told what it was. We have been told that it was a political sop, which is precisely the case.
Some hon. Members opposite suggested that employers ought to be ready to make sacrifices like everybody else. Well, they are. But what they want to know is that the sacrifices they are called upon to make are useful sacrifices. In their opinion, what the country is suffering from, and what is bringing us down as much as anything else, is excessive taxation. [Laughter.] Hon. Members may laugh at that, but the state of affairs in which 50 per cent. is taken from every company, even if it is distributing none of its profits, and a great deal more in many cases, is very serious for those engaged in business. It is all very well to laugh at old saws, but the proverb about killing the goose that lays the golden egg is something worth thinking about in these days; I commend that to hon. Members opposite and beg them to think about it.
I wish hon. Members opposite would sometimes tell their supporters some of the things they ought to know. The trade of this country and the general prosperity of us all will improve only when hon. Members opposite cease to misrepresent the nature of profits and begin to inform their supporters of the importance of profits. Do hon. Members opposite ever tell their supporters honestly that in a capitalist system profits are necessary in order to make the machine work? Do they ever go round to meetings and tell the workers that the heavy burden of Government expenditure can be met only by profits? It is out of profits that taxes are drawn. [Interruption.] If hon. Members opposite do not understand that, they do not understand how the Capitalist system works. We are living under a Capitalist system, and that is how it works. If there are no profits there will be no money for the Government to spend, for it is from profits that taxation is drawn.
I suggest to hon. Members opposite that it is about time they gave up attacking industry. Of course, there will always be some profiteers, and there will always be some bad workers; but I think we should be a good deal happier if criticism of the few profiteers were made by the honest traders, and if attacks on the few scrimshanking workers were made by the majority of honest-to-God working men who are doing a good day's work for their money. That would be a much better approach to the problem.
The main burden of our criticism of this tax is that it is an attack on the building up of companies' reserves; it is an attack on incentives; it prevents the much needed accumulation of capital; and, as my hon. Friend the Member for Bury (Mr. W. Fletcher) said, it prevents the introduction of capital into this country from abroad; it does not encourage people to introduce their capital from abroad under present conditions. We have been told by candid Members opposite that this tax was really introduced as a sop to Government supporters. We believe it is a thoroughly bad proposal, and we therefore urge everyone in this House to vote against the Second Reading of this Bill.

9.30 p.m.

The Financial Secretary to the Treasury (Mr. Glenvil Hall): The right hon. Member for the City of London (Mr. Assheton) began his speech by remarking that it was common form for the last speaker on that side of the House to say that we had had a very interesting Debate. It is certainly common form for the last speaker on this side to say much the same thing, and this time I can say it with very great truth.
I did not hear all the speeches from this side of the House, but I was fortunate enough to hear those of my hon. Friends the Members for Blackley (Mr. Diamond) and Gravesend (Sir R. Acland), my hon. and learned Friend the Member for Kettering (Mr. Mitchison) and my hon. Friend the Member for Central Southwark (Mr. Jenkins). Although I have no desire to introduce any sort of party prejudice into the discussion—[HON. MEMBERS: "Do not do that."]—I must in all honesty and truth say that I thought the speeches which they made were far and away the best. [Interruption.] It occurred to me that had hon. and right hon. Gentlemen opposite had the same grounding in economics as my hon. Friends behind me, these Debates would be less one-sided than they are.
We have a Finance Bill before us, and the astonishing thing—although it is perhaps natural, because it is a short Bill—is that we have not dealt very much with what is contained in its Clauses. As the right hon. Gentleman said, no doubt we shall come to that next week when we

reach the Committee stage. We have rather—and I do not complain—dealt with the situation as it is and the background against which the Bill has been introduced. It occurred to me, listening to the Debate, that some speakers on the other side now and again forgot what the proposal is. Let me, therefore, remind the House of what it is that my right hon. and learned Friend has proposed and what is put into the four corners of the Bill.
All that the Chancellor of the Exchequer proposes is that we should increase by 1s. in the £ the rate of tax, not on profits as such, but on those profits which are distributed. A great deal of the discussion, it seemed to me, centred in the supposition that profits as profits were under the hammer and that it was profits as profits that my right hon. and learned Friend was after. It is essential that we should remember that there is a distinction and keep it constantly in mind during the closing phases of the Debate.
As my hon. Friend the Economic Secretary indicated in his very lucid speech in opening the Debate this increase has been proposed not because the Chancellor on second thoughts had come to the conclusion that when the tax on distributed profits was put up to 25 per cent. it was too little. If he had thoughts of that kind, obviously the Finance Bill, which is introduced in April or thereabouts, is the occasion on which to make such change as he may deem necessary in the interests of the nation as a whole. Nor is the increase, in spite of what has been said on the other side of the House, introduced because my right hon. and learned Friend is in a vindictive mood, nor because he desires to rob anyone connected with production of their reasonable incentive or return. If this had been in his mind, he would have put the imposition, not on the profits which are distributed, but on all profits, making it 30 per cent. all over, instead of 30 per cent. for profits which are distributed and only 10 per cent. for those which are ploughed back.
The very nature of the proposal in itself is an answer to the main charges which have been made by hon. and right hon. Members opposite. Why has he imposed this tax? Why when hon. Members opposite expected an Autumn Budget of much wider dimensions, is this the only proposal he brings to the House and why


is it that hon. Members attack it and oppose it in the way they have? One would have imagined that it was so small a proposal and one which means so little to the pockets of the dividend receiver, that they would not have troubled to oppose it in the fashion in which they have.
We ought not to look at this in isolation. This proposal is only one of the many proposals which the Government have published and are now in process of putting into operation. It happens to be the only one which needs legislative sanction in order to operate it. I would again remind the House that it all stems from the fact that we have recently devalued the pound—[HON. MEMBERS: "Revalued."]. Revalued—I am in a very accommodating mood tonight. If hon. Members opposite call it "revalued" who am I to say that it is "devalued"? The central fact behind this Bill is that this country, unfortunately, has had to revalue the pound. This means that there will be less goods in the shops and, unless something is done to reduce the money in circulation, we run a very grave risk of inflation. My right hon. and learned Friend has to see to it that, so far as we can, we build up bulwarks against this threat to our economy.
It therefore seems essential that something should be done in order to minimise the inflationary risk as far as possible. If we have to reduce the amount of money in circulation the next thing we have to decide is how we shall do it. My right hon. and learned Friend and hon. Friends behind me believe that if this is to be done, it shall be done by equality of sacrifice, if that is possible. We know, and the House knows, that the wage earners are being asked to forego demands for increased remuneration in spite of some rise, which was inevitable, in the cost of living. We know that the prices of bread and flour are going up—[HON. MEMBERS: "Have gone up."]—they have gone up, and that in turn will mean that the old age pensioners and those on small incomes will suffer.
It is, therefore, only fair, both psychologically and actually, that those who receive dividends should bear their share of the burden. I am not talking now about those who earn dividends, namely the workers and the managerial staffs, but the

shareholders. I am not talking about them in any derogatory sense, but simply trying to place them where they should be when we are dealing with this problem. I am sure that on reflection hon. Members opposite do not desire, any more than we desire, to see the old age pensioner paying more for bread, and wage earners foregoing rises in wages, which they otherwise might think themselves entitled to, whilst the shareholder continues to receive what he got before, or even more. Therefore, it seems to us reasonable and fair that this modest tax should be imposed.
Then, too, I would remind the House that when the Prime Minister announced the cuts which have to be imposed he dealt almost exclusively with cuts which would take place in the public sector, and so far as I know this proposal is the only one which the Government are making in respect of private enterprise or the private sector of industry. If we are to understand the views expressed this afternoon and evening by hon. Gentlemen opposite, they are very willing that cuts should be imposed in the public sector, on schools, clinics, houses, hospitals, and the like, but they do not want private enterprise to be touched. I do not really believe that that is what they want, but they must excuse us if we come to the opposite conclusion, when we note how they talk and the way they propose to vote.
I turn to one or two of the speeches that have been made. I listened carefully, and with the utmost interest, as I always do, to the speech of the right hon. Member for Saffron Walden (Mr. R. A. Butler). I have been in the House with him for some time now and I remember the passing of the Education Act which will always be associated with his name. It occurred to me as I listened to him that he was not very happy in the speech that he had to make. He likes to make a constructive speech and that speech was almost completely, indeed, entirely destructive. Many of the arguments that he used were well answered by my hon. Friend the Member for Blackley.
For example, the right hon. Member for Saffron Walden asserted that the increase in the tax will mean further inroads into reserves. That point was made again by the right hon. Member for the


City of London. The White Paper dealing with the national income and expenditure of the United Kingdom blows sky high the arguments that this extra 5 per cent. on distributed profits makes inroads into the reserves and in some way reduces the capital which is available for future use.
If one looks at the table which is printed on page 10 of this White Paper, one sees that since the Profits Tax was previously increased the profits put to reserve have gone up considerably. For example, in 1946 gross additions to reserve were £785 million. In 1947, when my right hon. Friend the present Chancellor of the Duchy of Lancaster increased the Profits Tax, they went to £940 million and in 1948 they touched the very high figure of £1,215 million. Therefore it is quite untrue, if figures are any guide, for anyone to assert that the incidence of Profits Tax on distributed profits has in fact meant that less money has been put to reserve.

Mr. Assheton: May I comment on that? The particular figures which the right hon. Gentleman quoted are, of course, the figures which include the amount of money provided for taxes, and naturally in view of the enormous additional tax required, provision for them must be greatly increased.

Mr. Glenvil Hall: Yes, that is quite true. But if the right hon. Gentleman will look at the same table a few lines lower down he will find another set of figures. I did not quote them, because I did not want to weary the House, but they bear out what I am trying to say just as much as do the figures I have quoted. There the figures are of additions to free reserves after tax has been taken off. They are: £285 million in 1946, £425 million in 1947 and £545 million in 1948.
The right hon. Member for Saffron Walden asked me one or two other questions. One was, what was the percentage of our industry which would profit by devaluation. I am sorry to say that it is quite impossible for me to give him anything like a correct estimate of what that percentage might be. A moment's reflection will show how impossible it is for anyone at this Box to give anything like an accurate figure

for this. Some firms who do business in North America may, as a result of devaluation, increase one part of their business which finds a ready market in North America. But it would be very difficult at the end of the year, if it has dealings all over the world, for that firm to say how much it has benefited, much less for us, taking industry as a whole, to say just what percentage of industry generally has benefited by devaluation and better markets in North America. But that it will result in a gain to many firms we certainly hope, and I think that time will show that that is what will happen.
In one sense of course it is immaterial what extras are made by additional trade with North America—[HON. MEMBERS: "Why?"] I am coming to that and perhaps I may as well come to it now. A good many of the points made by hon. Members on the other side of the House have been based on the assertion that my right hon. and learned Friend is increasing this tax in order to penalise those who would do extra business in North America, and who will make additional profits—[HON. MEMBERS: "He said so."] I know he did. I have read the speeches of my right hon. and learned Friend just as have hon. Members opposite. He indicated that that was one reason why he considered that this tax was necessary and desirable; but it is not his only reason. Those who have read his speech in full will agree that he went on to say that it was impossible to segregate those profits from others. If my original proposition is accepted, as I hope it is—that it is essential that the dividend receiver should bear some share of the present sacrifice—then it is immaterial whether additional profits, or any profits at all which are distributed, are made in North America or somewhere else.
The fundamental fact is that psychologically, when the workers are making sacrifices at this juncture, it is right and proper that those who receive dividends should also make some sacrifice. I repeat that although my right hon. and learned Friend did say that additional profits made in North America were a fit subject for extra taxation, he had not only those profits in mind, because in his view, in my view and in the view of my hon.


Friends, all profits made in that way, if they are distributed and add to the inflationary situation, should bear their share of the sacrifice.
The right hon. Member for Saffron Walden asked if I could give the House information about what the Government were doing to encourage exporters to try to exploit dollar markets. Obviously it is essential that we should try to get industry, if it will, to exploit dollar markets. Some of them have got their order books fairly full, and they can be kept busy for some years, with orders received from other parts of the world. It may well be that some may say, "Why should we worry?" We as a Government and the nation as a whole want them to worry. We want them, if they will, to try to capture markets in hard currency countries, and we are willing to do everything we can to assist them.
My right hon. Friend the President of the Board of Trade has already done a great deal to try to help exporters to get into the dollar market. Unfortunately today the Liberal Party is conspicuous by its absence, but the hon. Member for Northern Dorset (Mr. Byers) suggested the other day that we might follow the system adopted in France of allowing exporters to keep for their unfettered use some of the hard currency which they earn in these markets. I think that the hon. and gallant Member for Monmouth (Mr. P. Thorneycroft) suggested recently that certain reductions in taxation should be given in order to provide incentives to go into these markets.
The Government feel that incentives of that kind are not the sort which this House would like to see put into operation. First, it would be rather difficult to do, and secondly, it seems to us that there are other and more straightforward ways of helping exporters to get into these markets. The Government are assisting exporters to hard currency countries to get raw materials. They are given priority where materials are scarce and we are helping with buildings and additional equipment where necessary. Also, in other ways, we are, in the words of my right hon. Friend the Prime Minister, openly treating these people in a way in which other exporters have up to now not been treated. "Open favouritism" were the words used by my right hon. Friend, Further, through the

Export Credits Guarantee Department, and in other ways, we are anxious and willing to help these exporters with special financial assistance.

Mr. Drayson: As this is a matter which I have discussed with the Secretary for Overseas Trade, can the right hon. Gentleman give me one example where open favouritism has been shown to a firm in this country to help them to get into the dollar market?

Mr. Glenvil Hall: The hon. Gentleman has not been in the House long—

Mr. Frederic Harris: If the right hon. Gentleman is referring to me, I have been in the House for the better part of two years, and I suggest to the Minister that I have listened to as many speeches as he has.

Mr. Glenvil Hall: The question put to me was whether the Government were in fact favouring certain exporters in order to help them to get into the North American market. That is a question which, if a detailed answer is required, should more appropriately be directed to my right hon. Friend the President of the Board of Trade, but I would say—and it is a case that occurs to me at once and would occur to anybody in this House who was even moderately informed on these things—that the motor car industry has had extra steel in order to help it to get into the North American market.
The hon. Member for Bury (Mr. W. Fletcher) said that the increase in the Profits Tax is fatal to the import of capital and particularly United States capital, which the Government are keen to encourage. I think the hon. Gentleman must have forgotten that, where we are dealing, as we mostly are, with the subsidiary companies of foreign concerns, that increase in the tax does not apply at all. The Profits Tax on concerns of that kind is no higher than 10 per cent.; the rate of 30 per cent. does not apply. Therefore, so far as we can see, this tax should not, as the hon. Gentleman suggested, prevent the capital from coming here.

Mr. W. Fletcher: But that only relates to the subsidiary companies; it does not relate to the introduction of new capital.

Mr. Glenvil Hall: I did say that, normally, the kind of American company


that is formed here is one which is a subsidiary of a foreign company overseas.
I think it is very unfortunate that the Opposition tonight intend to carry this Motion to a Division. It is a pity, it seems to me, that they cannot accept the spirit of the speech of the hon. Baronet the Member for Abingdon (Sir R. Glyn). I think that what he said was completely unanswerable. He is a respected Member of the party opposite and he announced quite openly that in no circumstances could he vote against this Bill. He took the view that it was essential in these days that managements and workers should get together when the country has its back to the wall. It is highly desirable that differences of opinion should not be found between workers and their employers, and there is unfortunately in the minds of very many workers a feeling that large profits are being piled up and that the well-to-do are getting away with something while they themselves are being asked to take less and to make sacrifices.
What we have to do is to get them to see what is the true position. We want them to see that profits are being taxed up to something like 60 per cent. and that managements as well as workers should cut back just now if this country is to survive. One way of showing that is for all of us, irrespective of where we sit in this House, to support this simple straightforward Measure which does no more than rough justice—very rough justice indeed; if it were 10 per cent. it might be nearer to rough justice—as between the collector of dividends and the man who actually produces the profits.

10.1 p.m.

Mr. David Eccles: As this is exempted Business, it would be a pity to let the Debate finish, especially after the speech to which we have just listened from the Financial Secretary to the Treasury. I also want to say a word about the speech of my hon. Friend the Member for Abingdon (Sir R. Glyn). His doctrine is one with which I think we all agree—that there should be sacrifices all round to meet this great and grave situation. But those sacrifices, to be successful, must result in all sections of the people being willing to do their best together to increase production, to save more, and to conquer the dollar markets.
We do not say that it is wrong to put a sacrifice upon the shareholders, who certainly must contribute something, but that this Bill does it in the wrong way. In a very few words I want to put forward that argument. Whether this tax is a deterrent to production or not, no one has come forward and said that extra taxation is going to help us close the dollar gap. It must be clear that we cannot get rich by increasing taxation, and until we get rich as a nation we shall not close that gap. The other side argue that the drag upon enterprise of heavier taxation is outweighed by the value of this tax as an instrument of social justice. That is the argument—that it is worth while assuaging the feelings of injustice among those wage earners who now have to pay more for school meals and once again have to pay for their medical prescriptions.
It may be true that the Labour Party cannot govern unless it repeatedly shows itself to be the enemy of those who get their living by making profits. It may be true that under this dispensation Ministers must have a slap at capital in order to maintain existing production, if workers are not to turn sour and are not to be less willing to co-operate in holding down costs. If that is so, then we have to be all the more careful that the kind of way in which we distribute the sacrifices does not produce the same sort of reaction in any part of the community. This is a tax which brings a bad reaction in industry, and I want to tell the House why it is essential that we should not deviate in the tiniest way from the path of maximum incentives to produce the right things at the right cost and to restore individual savings.
The fact is that the situation after devaluation is worse than it was before, and that can be shown by the astonishing omissions in the Chancellor's speech. The last big speech he made to this House was the first in which he never attempted to give us any estimates of the main figures in the national balance sheet. Nothing now adds up in our national balance sheet. The Chancellor gave us no figures to show what was the inflationary gap before devaluation. He gave us no figures to show how much that gap was increased after devaluation. Neither did he give us any figures of the deficit in our overseas balance of payments. All he said was that the overall


balance that we had had at the beginning of the year has been lost. Now we had an overall deficit in our balance of payments. That, of course, will be temporarily increased by devaluation, since the cost of imports will go up first and such extra dollars as we may earn will come later. We have no means of estimating our present balance looking over the whole picture of our foreign trade.
The Chancellor gave us no figures at all for savings. He said that he was going to reduce the capital investment programme from £2,100 million to £1,960 million. He gave no figures to show where those savings are coming from. All we can see is that there is a very great deficiency here. Nothing now adds up—neither the cuts against the inflationary gap, nor our earnings on overseas account against the payments we have to make for our imports, nor the savings that are necessary against our capital investment programme, and, what is perhaps even worse, nor do the receipts of the dollar pool of the sterling area add up to the outgoings which have to be drawn from that pool. In circumstances like that it is absolutely criminal to start fighting a class war and putting that strife ahead of the battle of production. That is the effect of this tax.
The question is whether or not this tax is the right way to put the sacrifice upon a certain section of the people who must bear the same sort of share as the penny on the school meals. As many hon. Gentlemen have said, profits are now excessive. That is true. But whose fault is that? Who has been pouring out the purchasing power in ever-increasing doses far greater than was necessary to sustain the volume of production at current prices? Who is it who has been making prices go up? Who has been causing it to be easy to make profits by keeping on quotas and restrictions which eliminate competition so that any of the lucky ones who were in business in 1938 have found it easy to make money?
The Government are responsible for these things. They are in control of the volume of money. All these restrictions which have made it far too easy for lazy or inefficient producers to continue are the direct result of two bad Chancellors of the Exchequer. This Bill is merely another fiddling way of dealing with the great

trouble in our economy which, if we do not deal with it, will mean not 200,000 or 300,000 more people out of work but three million.

Mr. Shurmer: The hon. Gentleman has been saying that for a long time.

Mr. Eccles: I have always been right. I ask my hon. Friends to witness that every time I gave a warning events have borne it out afterwards. The way to dear with these unhealthy profits is not to squeeze out a paltry £13 million, which is no good to anybody, but to get the profits down by £250 million. The only action the Government could think of was to hit good and bad firms alike, whether they are in the export trade or not, whether they are efficient or inefficient. The Government give a little tap on the head of all of them.
It is really the most ridiculous way to deal with so grave a crisis. What is required is the courage to deflate and squeeze out of the system £250 million profits. You would put some people out of work at the same time. [HON. MEMBERS: "How many?"] It cannot be helped. It is far better to have some transitional unemployment—half a million, if your like—than to have three million next year. It will be on the heads of right hon. Gentlemen opposite if they have not done it. This is not the time to seek popularity. This is the time to attempt to get the economy right before it is too late. I would remind the House again that nothing now adds up. Never has the House of Commons been in such darkness as to the way in which the most vital figures in our balance sheet can possibly add up over the next six months. Let any right hon. Gentleman get up and tell me what will be the state of our gold reserves in three or six months' time.

Mr. Mitchison: rose—

Mr. Eccles: The hon. and learned Member for Kettering (Mr. Mitchison) is not a right hon. Gentleman. I invited a right hon. Gentleman to rise. I know too well the form of the hon. and learned Member for Kettering. What is required is to give up this idea that, by inviting the British people to huddle ever closer round a dying fire, in some way or other we shall recover our prosperity. We have to find the ways and means of expanding


production and of getting the whole people together [An HON. MEMBER: "With unemployment?"] We shall go through that stage sooner or later. It is far better to have the courage to put things right while there is still time and while we can still pay for a reasonable proportion of the imports of necessities.

Mr. Shurmer: Good propaganda.

Mr. Eccles: Propaganda for you, may be. I am not one for propaganda; I am one for attempting to save the country from one of the worst crises it has ever gone into.

Mr. Shurmer: At somebody else's expense.

Mr. Eccles: Not at all. The people who will pay for the fact that right hon. and hon. Members opposite have not the courage to face up to the truth are the poorest people in the country. [HON. MEMBERS: "No."] Well, who would pay? Let hon. Members think: who will be the first to suffer if we are no longer able to pay for our imports? Who consume more imports relative to their income than anyone else? It is the poorest people. That is what is at stake and that is why this is one of the most stupid, fiddling little things that could possibly be done. So long as the Government act like this, it would be a good thing to vote against them every night.

10.14 p.m.

Major Bruce: I looked at the faces of hon. Members opposite while the hon. Member for Chippenham (Mr. Eccles) was speaking. I did not see there the usual undivided enthusiasm with which they customarily greet his remarks, because for quite a considerable portion of the day hon. Members opposite have been showing how difficult it is to make profits, what enterprise and drive are required to make them and how all who make them are highly deserving of the approbation of the community, but then along comes the hon. Member for Chippenham and says that profits are very easy to make. We must leave hon. Members opposite to argue this out among themselves.
Today, when we have been debating the Second Reading of this Bill, the burden of the argument from the Opposition, as I have seen it, is that it is unfair

to what the right hon. Member for the City of London (Mr. Assheton) described as the employers of labour and those who engage in business. The hon. Member for Bury (Mr. W. Fletcher) described it as a punitive Measure. Before we can really make up our minds whether or not we are going to give a Second Reading to this Bill, I think we have to consider whether it is, in fact, punitive. We have to go into some questions of the psychology of the employers of labour that have been raised by the other side of the House.
From our point of view I do think it important that we should bear in mind whom we are discussing. It is always the case when the Opposition get into a tight corner that some right hon. Gentleman from the Front Bench opposite will drag in the widows and orphans, and we are all very accustomed to that; it is also true that whenever big business suffers, whenever finance suffers, sooner or later some right hon. Gentleman from the Front Bench opposite is bound to bring in again the question of the widows and orphans. However, the fact of the matter is that the people who are going to suffer the most under this Bill, even though the Opposition still cannot make up their mind as to the degree of suffering to be inflicted, are the manufacturers, and included amongst them will be some who export to the sterling area, some to the dollar area, and some to both.
This class of person, an individual very much like ourselves, enjoys a higher standard of life than quite a lot of other people in the community. He is a person who is able to afford—and I am not saying for one moment that he is not entitled to afford and enjoy it—by and large, a much higher standard of life, a much greater standard of amenity, probably much more ease in his everyday life, than the majority of people who are engaged directly in production at the present time. Before, therefore, we talk about the question of fairness or unfairness, I think we have to consider that point of view.
Now, hon. Gentlemen opposite seem to think it fair at the present time that this particular class of the community, which, as I have said, enjoys a greater standard of amenity than millions of the rest of us, should be cossetted, nursed, and treated like really tender flowers at


the existing stage of our affairs, otherwise the private enterprise, the initiative and the drive which hon. Gentlemen opposite talk about in relation to the conduct of private business, will be extinguished. From the remarks of the hon. Member for Louth (Mr. Osborne), I gathered that private enterprise was getting in a very poor way indeed, because he seemed to be somewhat doubtful whether any effort would be made in the American market or not.
We are going to rely increasingly, as time passes, on the efforts of the manufacturers, particularly the manufacturers who export. I very often think that in their defence of the manufacturers generally the Opposition place a disproportionate emphasis on our production problem of this country. It is true, and I think hon. Members in all parts of the House would affirm it, that we must have a vastly increased production in this country. I do not think anybody disputes that. However, I think the point that ought to be borne in mind is that if the production of our country had, in fact, over the last two or three years been sold to the right places, then the necessity for a good number of the measures that have had to be taken over the last three or four months would not have arisen.
For the first half of 1949, the visible balance of trade in our country was running at some minus £48 million. That is at an annual rate of some £96 million. I quote this figure because it happens to be a very important one. At no time during the last 50 years in the history of our country has the visible balance of payments been less adverse than it is now. The lowest adverse balance of trade in Britain in the years from 1900 to 1939 was in 1911, when it was minus £121 million. The average visible adverse balance in the 20 years before the war was minus £354 million. I think that ought to be borne in mind. Today it shows that although we have a very long way to go, we have come nearer than we have done for half a century to balancing our trade accounts.
Therefore, although the problem is one of production, it goes to show that the problem is also one of where we sell our goods. Let us see what has been happening to those responsible in this country for selling our goods. It is extremely important that we should do

so because this is the section of the community who claim that they are being unfairly treated. We have it on the authority of the Minister of Trade and Commerce in Canada, Mr. Howe, that Canada is satisfied that with concerted efforts, sales could be pushed to considerably larger totals.
I am a little surprised about this. I should have thought that private enterprise in this country would have already made the concerted effort. I am a little surprised that the manufacturer in our country, to whom so much tribute is paid and whose private enterprise is praised, have not made more efforts. We find it even worse than that. We find that Sir Harry Gilpin, the chairman of the recent engineering mission to Canada, told manufacturers here that they could not expect to make a spectacular entry into a market which they had neglected for 30 years.
It was not the workers of Britain and not the people engaged in production in this country who neglected the Canadian market; it was the manufacturer and the exporter in this country. When Members of the Opposition ask us why we treat the exporters somewhat tenderly and when they say that we must be careful to nurture this somewhat fragile initiative, drive and enterprise which they possess, I think that we are entitled to look at the type of people of whom they are talking.
I am not saying, and no one on this side would wish to say, that these strictures passed by leading Canadians and, indeed, by our own trade commissions apply to all manufacturers. But they apply to quite a large number, and it would not do this country any harm if, instead of addressing the strictures which they do to the working people of our country—the people 4f whom the "Daily Mail" says that their fibre has been rotted by easy State benevolence, and things of that kind—hon. Members opposite also addressed some of their criticisms to those whose responsibility it has been for over 50 years and whose responsibility it remains, to see that the production of our workers is sent to the right place.
I know these are at present privileged individuals. I know that this tax may fall heavily upon some of them, even if hon. Members opposite seem


to differ in their views as to whether it is trivial or heavy. I, personally, am satisfied that in the inflationary condition already described by the Chancellor of the Exchequer the extra burden borne by these people, however trivial it may be, is clearly in the interests of the community as a whole, and should not only be borne by them but should be accompanied by a greater amount of initiative and drive than in many cases they have shown in the past.

Mr. Frank Byers: Before the hon. and gallant Gentleman sits down—

Mr. Boothby: rose in his place, and claimed to move, "That the Question be now put," but Mr. SPEAKER withheld his assent, and declined then to put that Question.

Mr. Byers: Might I ask the hon. and gallant Gentleman, after that peroration which he has just made to the House, whether he has considered the possibility, not of going along the lines of the class war, but of sharing the profits with the workers, who indeed are the people who primarily produce the goods?

Major Bruce: Since the hon. Gentleman asks me, I most certainly have considered that, and my hon. Friends have been considering it for a number of years. The particular point I was addressing myself to was the question of an appreciation by a section of our community, of a social responsibility that should rise a little higher than personal profit and personal gain.

Question put, "That the word now stand part of the Question."

The House divided: Ayes, 235; Noes, 127.

Division No. 271.]
AYES
[10.25 p.m.


Acland, Sir Richard
Cullen, Mrs.
Hewitson, Capt. M.


Adams, Richard (Balham)
Daines, P.
Hobson, C. R.


Albu, A. H.
Dalton, Rt. Hon. H.
Holman, P.


Alpass, J. H.
Davies, Edward (Burslem)
Holmes, H. E. (Hemsworth)


Attewell, H. C.
Deer, G.
Horabin, T. L.


Austin, H. Lewis
Delargy, H. J.
Houghton, Douglas


Awbery, S. S.
Diamond, J.
Hubbard, T.


Ayles, W. H.
Dobbie, W.
Hudson, J. H. (Ealing, W.)


Ayrton Gould, Mrs. B.
Dodds, N. N.
Hughes, Emrys (S. Ayr)


Baird, J.
Driberg, T. E. N.
Hughes, Hector (Aberdeen, N.)


Barnes, Rt. Hon. A. J.
Dugdale, J. (W. Bromwich)
Hughes, H. D. (W'lverh'pton, W.)


Barstow, P. G.
Dye, S.
Hynd, H. (Hackney, C.)


Barton, C.
Ede, Rt. Hon. J. C.
Hynd, J. B. (Attercliffe)


Battley, J. R.
Edelman, M.
Irvine, A. J. (Liverpool)


Bechervaise, A. E.
Edwards, John (Blackburn)
Irving, W. J. (Tottenham, N.)


Bellenger, Rt. Hon. F. J.
Edwards, Rt. Hon. N. (Caerphilly)
Isaacs, Rt. Hon. G. A.


Berry, H.
Edwards, W. J. (Whitechapel)
Janner, B.


Beswick, F.
Evans, Albert (Islington, W.)
Jay, D. P. T.


Blackburn, A. R.
Evans, John (Ogmore)
Jeger, Dr. S. W. (St. Pancras, S. E.)


Blenkinsop, A.
Evans, S. N. (Wednesbury)
Jenkins, R. H.


Blyton, W. R.
Ewart, R.
Jones, D. T. (Hartlepool)


Boardman, H.
Field, Capt. W. J.
Jones, P. Asterley (Hitchin)


Bottomley, A. G.
Fletcher, E. G. M. (Islington, E.)
Keenan, W.


Bowden, H. W.
Forman, J. C.
Kenyon, C.


Braddock, Mrs. E. M. (L'pl. Exch'ge)
Fraser, T. (Hamilton)
Kinley, J.


Braddock, T. (Mitcham)
Freeman, J. (Watford)
Kirkwood, Rt. Hon. D.


Bramall, E. A.
Gaitskell, Rt. Hon. H. T. N.
Lindgren, G. S.


Brook, D. (Halifax)
Gibson, C. W.
Lipton, Lt.-Col. M.


Brooks, T. J. (Rothwell)
Gilzean, A.
Longden, F.


Broughton, Dr. A. D. D.
Glanville, J. E. (Consett)
McAdam, W.


Brown, T. J. (Ince)
Gordon-Walker, P. C.
McKay, J. (Wallsend)


Bruce, Maj. D. W. T.
Greenwood, Rt. Hon. A. (Wakefield)
Mackay, R. W. G. (Hull, N. W.)


Burden, T. W.
Grenfell, D. R.
McKinlay, A. S.


Burke, W. A.
Grey, C. F.
McLeavy, F.


Butler, H. W. (Hackney, S.)
Griffiths, Rt. Hon. J. (Llanelly)
Macpherson, T. (Romford)


Callaghan, James
Guest, Dr. L. Haden
Mallalieu, E. L. (Brigg)


Carmichael, James
Gunter, R. J.
Mallalieu, J. P. W. (Huddersfield)


Chamberlain, R. A.
Guy, W. H.
Mann, Mrs. J.


Champion, A. J.
Haire, John E. (Wycombe)
Manning, C. (Camberwell, N.)


Chetwynd, G. R.
Hall, Rt. Hon. Glenvil
Mathers, Rt. Hon. George


Cocks, F. S.
Hamilton, Lieut.-Col. R.
Mellish, R. J.


Collindridge, F.
Hannan, W. (Maryhill)
Middleton, Mrs. L.


Collins, V. J.
Hardy, E. A.
Mitchison, G. R.


Cooper, G.
Hastings, Dr. Somerville.
Monslow, W.


Corlett, Dr. J.
Haworth, J.
Moody, A. S.


Cove, W. G.
Henderson, Rt. Hon. A. (Kingswinford)
Morgan, Dr. H. B.


Crawley, A.
Henderson, Joseph (Ardwick)
Morley, R.


Crossman, R. H. S.
Herbison, Miss M.
Morris, P. (Swansea, W.)




Moyle, A.
Ross, William (Kilmarnock)
Thomas, John R. (Dover)


Murray, J. D.
Royle, C.
Thorneycroft, Harry (Clayton)


Nally, W.
Sargood, R.
Thurtle, Ernest


Neal, H. (Claycross)
Segal, Dr. S.
Tiffany, S.


Nichol, Mrs. M. E. (Bradford, N.)
Shackleton, E. A. A.
Tomlinson, Rt. Hon. G.


Nicholls, H. R. (Stratford)
Sharp, Granville
Ungoed-Thomas, L.


Noel-Baker, Capt. F. E. (Brentford)
Shawcross, C. N. (Widnes)
Vernon, Maj. W. F.


Noel-Buxton, Lady
Shurmer, P.
Viant, S. P.


O'Brien, T.
Silkin, Rt. Hon. L.
Wallace, G. D. (Chislehurst)


Oldfield, W. H.
Silverman, J. (Erdington)
Wallace, H. W. (Walthamstow, E.)


Oliver, G. H.
Simmons, C. J.
Warbey, W. N.


Orbach, M.
Skinnard, F. W.
Weitzman, D.


Paling, Rt. Hon. Wilfred (Wentworth)
Smith, C. (Colchester)
Wells, W. T. (Walsall)


Pannell, T. C.
Smith, H. N. (Nottingham, S.)
White, H. (Derbyshire, N. E.)


Pargiter, G. A.
Smith, S. H. (Hull, S. W.)
Whiteley, Rt. Hon. W.


Parker, J.
Snow, J. W.
Wigg, George


Parkin, B. T.
Solley, L. J.
Wilcock, Group-Capt. C. A. B.


Paton, Mrs. F. (Rushcliffe)
Sorensen, R. W.
Willey, F. T. (Sunderland)


Paton, J. (Norwich)
Soskice, Rt. Hon. Sir Frank
Willey, O. G. (Cleveland)


Pearson, A.
Sparks, J. A.
Williams, Ronald (Wigan)


Piratin, P.
Steele, T.
Williams, W. R. (Heston)


Pritt, D. N.
Stewart, Michael (Fulham, E.)
Wills, Mrs. E. A.


Proctor, W. T.
Strachey, Rt. Hon. J.
Wilmot, Rt. Hon. J.


Pryde, D. J.
Strauss, Rt. Hon. G. R. (Lambeth)
Wilson, Rt. Hon. J. H.


Pursey, Comdr. H.
Sylvester, G. O.
Woods, G. S.


Ranger, J.
Symonds, A. L.
Wyatt, W.


Reeves, J.
Taylor, H. B. (Mansfield)
Yates, V. F.


Reid, T. (Swindon)
Taylor, R. J. (Morpeth)
Young, Sir R. (Newton)


Richards, R.
Taylor, Dr. S. (Barnet)
Younger, Hon. Kenneth


Ridealgh, Mrs. M.
Thomas, D. E. (Aberdare)



Robinson, Kenneth (St. Pancras, N.)
Thomas, Ivor Owen (Wrekin)
TELLERS FOR THE AYES:




Mr. Popplewell and Mr. Wilkins.




NOES


Agnew, Cmdr. P. G.
Harris, F. W. (Croydon, N.)
Osborne, C.


Amory, D. Heathcoat
Harvey, Air-Comdre. A. V.
Peake, Rt. Hon. O.


Assheton, Rt. Hon. R.
Hinchingbrooke, Viscount
Pickthorn, K.


Baldwin, A. E.
Hollis, M. C.
Pitman, I. J.


Baxter, A. B.
Hope, Lord J.
Ponsonby, Col. C. E.


Beamish, Maj. T. V. H.
Howard, Hon. A.
Poole, O. B. S. (Oswestry)


Bennett, Sir P.
Hurd, A.
Prior-Palmer, Brig. O.


Birch, Nigel
Hutchison, Lt.-Cm. Clark (E'b'rgh, W.)
Raikes, H. V.


Boles, Lt.-Col. D. C. (Wells)
Hutchison, Col. J. R. (Glasgow, C.)
Reed, Sir S. (Aylesbury)


Boothby, R.
Jarvis, Sir J.
Renton, D.


Bossom, A. C.
Jeffreys, General Sir G.
Roberts, Emrys (Merioneth)


Bower, N.
Joynson-Hicks, Hon. L. W.
Roberts, H. (Handsworth)


Boyd-Carpenter, J. A.
Keeling, E. H.
Robinson, Roland (Blackpool, S.)


Bromley-Davenport, Lt.-Col. W.
Lambert, Hon. G.
Ropner, Col L.


Bullock, Capt. M.
Lancaster, Col. C. G.
Ross, Sir R. D. (Londonderry)


Butler, Rt. Hn. R. A. (S'ffr'n W'ld'n)
Langford-Holt, J.
Shepherd, W. S. (Bucklow)


Byers, Frank
Legge-Bourke, Maj. E. A. H.
Spearman, A. C. M.


Carson, E.
Lennox-Boyd, A. T.
Stanley, Rt. Hon. O.


Challen, C.
Linstead, H. N.
Stoddart-Scott, Col. M.


Clarke, Col. R. S.
Lipson, D. L.
Strauss, Henry (English Universities)


Conant, Maj. R. J. E.
Lloyd, Maj. Guy (Renfrew, E.)
Stuart, Rt. Hon. J. (Moray)


Crookshank, Capt. Rt. Hon. H. F. C.
Low, A. R. W.
Taylor, C. S. (Eastbourne)


Crosthwaite-Eyre, Col. O. E.
Lucas-Tooth, Sir H.
Taylor, Vice-Adm E. A. (P'dd't'n, S.)


Crowder, Capt. John E.
MacDonald, Sir M. (Inverness)
Teeling, William


Cuthbert, W. N.
Macdonald, Sir P. (I. of Wight)
Thomas, Ivor (Keighley)


Davidson, Viscountess
Mackeson, Brig. H. R.
Thomas, J. P. L. (Hereford)


Digby, S. Wingfield
McKie, J. H. (Galloway)
Thorp, Brigadier R. A. F.


Dodds-Parker, A. D.
Maclean, F. H. R. (Lancaster)
Touche, G. C.


Dower, Col. A. V. G. (Penrith)
Macpherson, N. (Dumfries)
Turton, R. H.


Drayson, G. B.
Maitland, Comdr. J. W.
Walker-Smith, D.


Drewe, C.
Manningham-Buller, R. E.
Ward, Hon. G. R.


Eccles, D. M.
Marlowe, A. A. H.
Watt, Sir G. S. Harvie


Elliot, Lieut-Col. Rt. Hon. Walter
Marshall, D. (Bodmin)
Webbe, Sir H. (Abbey)


Fleming, Sqn.-Ldr. E. L.
Maude, J. C.
White, Sir D. (Fareham)


Fletcher, W. (Bury)
Mellor, Sir J.
White, J. B. (Canterbury)


Fox, Sir G.
Molson, A. H. E.
Williams, C. (Torquay)


Fraser, H. C. P. (Stone)
Morrison, Rt. Hon. W. S. (Cirencester)
Willoughby de Eresby, Lord


Fraser, Sir I. (Lonsdale)
Mott-Radclyffe, C. E.
York, C.


Gage, C.
Neven-Spence, Sir B.
Young, Sir A. S. L. (Partick)


Galbraith, Cmdr. T. D. (Pollok)
Nicholson, G.



Gates, Maj. E. E.
Noble, Comdr. A. H. P.
TELLERS FOR THE NOES:


Gridley, Sir A.
Nutting, Anthony
Mr. Studholme and


Grimston, R. V.
Odey, G. W.
Colonel Wheatley.


Hannon, Sir P. (Moseley)
Orr-Ewing, I. L.

Bill read a Second time and committed to a Committee of the Whole House for Tomorrow.

DOUBLE TAXATION RELIEF

Resolved:
That an humble Address be presented to His Majesty, praying that the Double Taxation Relief (Taxes on Income) (Basutoland) Order, 1949, be made in the form of the Draft laid before this House on 20th July

Resolved:
That an humble Address be presented to His Majesty, praying that the Double Taxation Relief (Taxes on Income) (Swaziland) Order, 1949, be made in the form of the Draft laid before this House on 20th July.

Resolved:
'That an humble Address be presented to His Majesty, praying that the Double Taxation Relief (Taxes on Income) (Bechuanaland Protectorate) Order, 1949, be made in the form of the Draft laid before this House on 20th July."—[Mr. Glenvil Hall.]

To be presented by Privy Councillors or members of His Majesty's Household.

UTILITY GOODS (PRICES)

10.36 p.m.

Mr. Boyd-Carpenter: There are three Motions on the Order Paper with reference to Statutory Instruments. The President of the Board of Trade has been courteous enough to inform me that one of the orders has been revoked by him by a subsequent Statutory Instrument. It would be a waste of time if, indeed, it were in Order, to discuss that order, and perhaps the right hon. Gentleman will indicate which of these orders is the one concerned.

The President of the Board of Trade (Mr. Harold Wilson): The hon. Member said, "It is No. 1600, is it not?" to which my answer was, "Yes." I should have thought that that indicated the Utility Cloth and Utility Household Textiles (Maximum Prices) (Amendment No. 2) Order, 1949, which was revoked by order laid before this House on 15th October last and which came into operation on 26th October.

Mr. Boyd-Carpenter: I would not wish to proceed on that order. I desire if I may, in moving the next Motion, which is No. 1608, to discuss also Order No. 1599, dealing with utility apparel, as the point on both orders, as on all three orders, is precisely the same.

Mr. Speaker: I am sure it would be for the convenience of the House to take these Motions together.

Mr. Boyd-Carpenter: I beg to move,
That an humble Address be presented to His Majesty, praying that the Order, dated 25th August, 1949, entitled the Utility Footwear (Maximum Prices) (No. 2) Order, 1949 S.I., 1949, No. 1608), a copy of which was laid before this House on 27th August, be annulled.
The subject of these orders was first raised in this House in a statement which the President of the Board of Trade made shortly before the House rose for the Summer Recess on 28th July, 1949. It was a longish statement, beginning at Column 2,690 of the OFFICIAL REPORT. The right hon. Gentleman there indicated his intention to make a number of orders, of which the two with which the House is now concerned are only, I think, a fairly small proportion, reducing among other things the margins to which, under his price-fixing orders, retailers were to be entitled on the sale of certain categories of utility goods. The principal part of his statement which is in my view, wholly relevant to the issue now before the House, occurs at Column 2691 of the OFFICIAL REPORT. He there describes, if I may say so completely accurately, the effect of these orders:
The changes will mean lower gross margins for these utility goods than has hitherto been allowed, and will probably necessitate a reduction in costs which may take the form of smaller staffs and curtailment of services to the public.
We were told that the orders giving effect to these changes would come into force early in September. Then, and I ask the House to mark these words, the right hon. Gentleman said:
I have been unable to consult the trade associations concerned as has been usual before substantial changes were made in controlled prices."—[OFFICIAL REPORT, 28th July, 1949; Vol. 467, c. 2691.]
Two days later, the House adjourned for the Summer Recess, and the right hon. Gentleman departed on, I have no doubt, a well-earned holiday in, I believe, the South of France.
There was naturally some reaction in the trades concerned, and in his absence, the right hon. Gentleman's unfortunate Parliamentary Secretary had to deal with the matter. When he returned, he had some discussions with, at any rate, some of the trade organisations concerned; but


it is abundantly clear that he did not satisfy them as to the merits of these proposals or of their justice. On 20th October, shortly after the House resumed, I asked the right hon. Gentleman a Question on the subject of these discussions, which is reported at Column 737 of HANSARD for that date.
The particular point with which I would trouble the House is a supplementary question, in which I asked the right hon. Gentleman if he had succeeded in satisfying the people with whom he had the discussions that he was treating them justly. The right hon. Gentleman replied:
If the hon. Member who I noticed engaged himself in some activities on this subject during August, is asking me whether I received full agreement from all the interests concerned in the discussions, the answer is, of course, 'No, Sir.' If I had had to wait until I got agreements we should not have got these reductions probably for two or three years."—[OFFICIAL REPORT, 26th October, 1949; Vol. 468, c. 738.]
That, I think, is a rather ungracious comment for the right hon. Gentleman to have made about trade organisations with which his department had been in consultation on a number of previous price changes.
I pressed him farther and said I had not asked if he had obtained agreement—a fact which was well within the knowledge of every Member of the House—but whether he had satisfied the people with whom he had had discussions that he had treated them justly. He gave no answer, but the answer so far as some of those people are concerned was given last month at Cardiff when three resolutions were passed and sent to the Prime Minister by the National Chamber of Trade. The first referred to the arbitrary manner in which the President of the Board of Trade had treated the traders concerned, and the third asked that he should be removed from his appointment. When a section of the community—and whether it is right or wrong is no matter—has a sense of rankling injustice, it is right and proper that hon. Members should discuss the matter in this House. From the point of view of the people concerned, this matter should be raised, apart from the fact that it also gives the opportunity for the right hon. Gentleman to put his side of the case.
I want to deal with two points; first, the method, and, secondly, the substance

of these price reductions. As to the first, the right hon. Gentleman, in his original statement to the House, said it was impossible to discuss the matter with any of the bodies concerned. In previous cases discussions have taken place, and no one knows better than the right hon. Gentleman that in the highly complicated circumstances of the business of retail distribution injustice is imposed unless one first goes into the facts with the people intimately concerned. That is what the right hon. Gentleman and his predecessors previously did. The right hon. Gentleman has not yet told us what the urgency was which made the normal procedure inapplicable in this instance.
We are here talking of the end of July, at which time His Majesty's Government had not made up their minds to devalue the pound. What, therefore, was the urgency of the matter? The only circumstance which might have given a little urgency was the fact that the Trades Union Congress was meeting in the middle of September and it was desired to strengthen the hand of the Prime Minister in his not very successful appeal to them. I do not know, but perhaps the right hon. Gentleman will tell us, what the urgency was which prevented the right hon. Gentleman having the normal discussions.
I am sure that he will appreciate that, particularly where he is going to inflict substantial hardship on a section of the community, it is all the more important that their minds should be properly prepared by proper discussion in advance, so that they could not only be certain that what the right hon. Gentleman was doing was a serious attempt to deal with a serious problem, and that it was not the arbitrary act of an ignorant Department. That is how the matter will strike people if there are not preliminary consultations. I am not saying whether this is a right or wrong impression, but I am saying it is an inevitable impression.
The object of these orders—the reduction of the retail profit margin—is an admirable one, to which hon. Gentlemen opposite pay lip service with great frequency. The object is, of course, the reduction of the cost of living, and in view of the way in which it has risen in recent years it is obvious that, even belatedly, the right hon. Gentleman should apply his mind to it. The question


is whether, in pursuing this admittedly laudable idea, the right hon. Gentleman has taken a wise or equitable course. The consequence, the deliberate consequence, of this action is to reduce the earnings of the retailers. We are dealing here with the retailer who deals in utility goods, and, therefore, it is a reduction in the earnings of the small retailer a large proportion of whose turnover consists in utility goods.
I am not suggesting that these orders will give the slightest discomfort to the large scale multiple stores such as Harrods or Fortnum and Mason's. The people it affects are the substantial number of small retailers in the poorer areas, who rely for the greater part of their earnings on the sale of utility goods. The object of the orders is to reduce the earnings of these people. It reduces the price, but in order to do so there is a reduction in the earnings on which those people live.
That is a marked differentiation in the treatment of a section of the community by His Majesty's Government compared with the rest of the community. As I understand it, the policy of the Government is to freeze incomes and to hold money wages at their present level. That is their declared policy as regards the rest of the community, but with respect to this section, the right hon. Gentleman, by a deliberate act, inflicts a reduction of income. It seems on the face of it, and I think he will agree it seems to the people concerned, to be unjust to discriminate in this way and to impose this selective reduction on this one section of the community.
These small shopkeepers have to share in the inevitable hardship caused by the general rise in the cost of living. On top of it they are to have inflicted upon them a reduction in their income. The right hon. Gentleman in his statement suggested that they should deal with the matter, in part, by a reduction of staffs. It is interesting to see that the right hon. Gentleman is suggesting the creation of a certain degree of unemployment, which I did not know was his declared policy. That suggestion is clearly made because nobody knows better than he does that the non-mobility of labour because of the housing shortage will make it difficult for

the persons rendered redundant to find other employment within reach of their homes. The position might be different if housing were tackled in other areas, but the right hon. Gentleman knows perfectly well the brake that absence of housing imposes upon the otherwise highly-desirable mobility of labour.

Mr. Wilson: Is the hon. Member really suggesting that if shop workers were displaced in Birmingham or Manchester or even in Kingston-upon-Thames, that they could not find work locally without having to go and seek houses in other parts of the country?

Mr. Boyd-Carpenter: The right hon. Gentleman challenges me upon the Royal Borough of Kingston-upon-Thames, and I say this. If, as a result of this Measure, a substantial number of workers in the shopping centre of that town, which is a very large shopping centre, were rendered redundant, they would have the greatest difficulty in finding alternative work, in particular since the Minister of Supply permitted Messrs. Leyland to remove their works from that part of the world. The right hon. Gentleman has selected a singularly unfortunate example for his argument. He has also not addressed his mind to the fact that many shopping centres, unlike the Royal Borough of Kingston-upon-Thames, are remote from industry, particularly, for example, in the coastal towns. If he suggests that the displaced shop assistants in Bournemouth or Brighton find it particularly easy within reach of their homes—

Mr. Collins: Can the hon. Gentleman say whether he made it his business to inquire in the last two months if there was any considerable advance of unemployment in Kingston-upon-Thames arising from this Measure, or if there was any at all?

Mr. Boyd-Carpenter: The hon. Gentleman, if he studies the order, will appreciate that it did not come into effect until 26th September which is about five weeks ago. If he has practical experience, of business, as some hon. Members have, he knows perfectly well that it takes some months for an order of this kind to take effect.
Perhaps the right hon. Gentleman did not address his mind to this aspect of the matter. Many of the people con-


cerned, the small shopkeepers, the people actually hit by this Measure, have only one assistant. They cannot divide that assistant up into sections and get rid of one section. The one shop assistant is one and indivisible and they have to paralyse their business by getting rid of him or carry the loss themselves. [An HON. MEMBER: "Hear, hear."] I am sorry the hon. Gentleman opposite should say, "Hear, hear," to that. That is not an admirable way to refer to people who earn their living by their own efforts at a difficult job and in these days when the policy of the Government, which he supports, has inflicted hardships upon every section of the community. It ill becomes the hon. Gentleman to sneer in that way at one section upon whom hardship is inflicted.
The right hon. Gentleman seems to think that the one way to deal with this matter was to get rid of staffs. It may be possible at the cost of service to the public, of increased cost of man and woman hours, by waiting in queues for long periods, which could more profitably be used elsewhere. In the greater number of cases, it is not feasible to dispose of the limited staffs concerned, and in fact the result will be a net loss in income to the retailer concerned.

Mr. Sargood: The whole of the hon. Gentleman's argument is based on loss of income. Is he seriously suggesting that there has been a falling-off in the sale of utility clothing as a result of the orders?

Mr. Boyd-Carpenter: I think the hon. Member has not fully appreciated the effect of the orders, which, I think, he has not got in front of him. The effect is not to reduce directly the amount of utility clothing sold. It is to diminish the percentage on each particular utility article which the retailer is entitled to retain. Therefore he will appreciate that on the same turnover a reduced income results. I hope I make myself clear.
The method the President of the Board of Trade has seen fit to adopt in pursuing the admittedly praiseworthy idea of seeking to reduce the cost of living would be more tolerable to the people concerned if it had been applied less narrowly. It contrasts very oddly, for example, with the trading methods em-

ployed by the Government, who have done nothing to reduce their profits. The Minister of Supply raised the cost of nonferrous metals within 24 hours of the announcement of devaluation to the extent of 30 per cent. and set an example in this respect.
Nor have the nationalised industries, who are perhaps even more to blame because they sell directly to the public, done anything of the sort to reduce their income. On the contrary, gas and electricity charges have been raised; and if the Government are making a sincere attempt to reduce the cost of living by cuts in the cost of articles that the public buy, it seems a little odd that they should have gone out of their way to impose these sacrifices upon one section of private trade, while the nationalised industries they control are acting in a precisely contrary sense.
It is this contrast between the treatment of the retailer and the behaviour of the Government in every other sphere of our economic activity which I believe has given rise to a good deal of the sense of undoubted injustice which exists. The people concerned feel that they have been picked on by the Government for unexplained reasons for sacrifices which the Government have not imposed on anybody else. It may be because they are a section of the community that cannot strike, that serves the public in little businesses of their own with their own capital involved in them, and therefore that obviously cannot strike without ruining those businesses. Whatever the motives of the Government, there is a feeling that the selective treatment of these people by the Government has been a mean and shabby business and it undoubtedly leaves behind it a sense of rankling injustice.

10.59 p.m.

Colonel J. R. H. Hutchison: I beg to second the Motion.
My hon. Friend the Member for Kingston-on-Thames (Mr. Boyd-Carpenter) has so admirably covered the ground that I propose to say very little. I want, however, to express, the disappointment that trade and industry have felt about the way the Minister refused to consult the associations concerned. The disappointment is all the greater because the Minister was showing evidence of realising the importance of consulta-


tion. Indeed, that method of treatment was fortified by the Prime Minister's remarks only the other day about the trade associations entering into consultations with the Departments concerned, and that he should have dropped his enlightend ways by this action has caused great disappointment. When associations are formed and have at their disposal the facts and figures and the effects of actions likely to be taken, it seems the height of stupidity for the right hon. Gentleman not at least to listen to their views.
If that is important in England, where the Minister has quite ready at his disposal certain information, in Scotland it becomes all the more important through the differences in trading methods and customs. It is just that sort of cavalier treatment, that violent action taken without considering the effect that will be caused, that has inflamed and is inflaming Scottish opinion at the present time. That is the only new facet which I have to add to what my hon. Friend has so ably expressed. I beg the Minister, if he is going to take similar action in the future, to see that Scottish interests are consulted beforehand.

11.2 p.m.

The President of the Board of Trade (Mr. Harold Wilson): The hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) has raised two main points—first, the method by which this operation was put through and the alleged lack of consultation, and secondly, the substance of the orders which are the subject of our debate. I would remind the House that the orders which we are discussing are only those relevant to the retailers' and wholesalers' margins on footwear and on utility apparel. They do not cover at all the orders relating to the reductions in manufacturing prices.
The hon. Member for Kingston-upon-Thames has taken objection to the fact that I announced these cuts in the House immediately before the Recess, without previously consulting the trades concerned. I want to repeat—and perhaps this will deal with the point raised by the hon. and gallant Member for Central Glasgow (Colonel Hutchison)—that the special action taken on this occasion does not in any way detract from my general desire to deal with these matters by consultation. I am really amazed at the ten-

derness the two hon. Members have shown on this question of failure to consult the traders concerned before making an announcement in this House, because I am sure that if I had gone right through the whole gamut of consultations—and that would have taken months—before saying anything in this House, some hon. Members opposite would have risen and said, "Why did you not tell the House before you consulted the traders"? It would certainly have been a long job.
As I have already pointed out, the House will realise—and I am sure the hon. Member for Kingston-upon-Thames realises—that our powers of price control have normally been used in the past for preventing price increases, as far as possible, or for bringing prices down in individual cases where costs had fallen. On this occasion, however, the powers are being used to bring down both costs and prices when, in our view, they were excessive, in a large-scale operation over an unusually wide field. I feel it therefore right to tell the House that this was the intention of the Government. The complaint seems to be that before I told the House I should have got into some sort of huddle with all these trade associations, but the hon. and gallant Member for Central Glasgow and some of his hon. Friends, only two nights ago, told the House that the clothing trade covered such a wide range of interests, covered so many businesses and trade associations, that it was impossible to have a development council to speak for them.

Colonel Hutchison: But the right hon. Gentleman will agree that we never said it was undesirable to consult them. All we said was that the result of his consultations was all wrong.

Mr. Wilson: Perhaps if there had been a development council it would have been possible to consult the whole trade in one operation. The point I was trying to make was that with this large number of trade associations—I think the figure of 25 was mentioned—with the manufacturing side, the wholesalers and the retailers organisations and the special Scottish organisations and all the rest of it, it would have been quite impossible, in anything like a measurable period of time, to have consulted all of them before coming down to the House and making this announcement. The hon. Gentleman has used the word "consultation," but to a


good number of people in the trade it means something quite different to the meaning he was putting upon it. What a lot of them mean by it is that I should not have proceeded in this matter until I had got their agreement.
There has been, I think, a good deal of humbug in the past two or three months about my failure to consult. Suppose for the sake of argument I had been able to call a mass meeting of all the trade associations concerned. I should probably have had to take Caxton Hall to do it, like the hon. Gentleman and his friends. Supposing I had put these proposals before them. There could not have been any question of agreement in my lifetime or the lifetime of the hon. Gentleman. I have experienced negotiations for several months on the price change of a single commodity. How could we have got agreement? I am certain that most of the associations would have said they had not the power to agree and that they would have to go to their regional bodies, local associations, or individual constituents; and was the House of Commons not to be told until all this process had been gone through?
To suggest that I tried to do it without any consultation at all is, of course, misleading, because in answering a supplementary question by the right hon. Member for West Bristol (Mr. Stanley) after my statement in the House, I made it clear that I was expecting representations from the trade, and said that I or other representatives of my Department would be glad to consider them. In fact, deputations were received by myself and my Parliament Secretary from the retailers, the wholesalers and the manufacturers. It took quite a number of meetings to get round these bodies. It was made plain to those deputations that the decision to make the reduction of 5 per cent. must stand, but that within this decision the views expressed and the suggestions put forward would be taken into account in deciding how the reduction would be spread among the retailers, wholesalers and manufacturers. It is common knowledge that we considerably amended the form of the tentative proposals in the light of their comments, and it was only after discussions that we could decide what would be a reasonable division of the burden between the retailer, the wholesaler and the manufacturer. So much for the question of consultation.
The second point raised by the hon. Gentleman was whether the order itself was fair and reasonable. "Wise and equitable" were his words. Clearly hon. Gentlemen opposite cannot be opposed to a reduction in the price of household textiles and clothing. The hon. Gentleman associated himself with that laudable desire, and the fact that the Tory Party has plastered the hoardings of the country with lavish promises about the cost of living suggests that one essential element they would have to tackle sooner or later is the level of distributors' margins as well as manufacturers' profits.

Mr. Boyd-Carpenter: And Government expenses.

Mr. Wilson: I am quite sure—in fact I remember from the Debate in July—hon. Gentlemen opposite as well as those on this side of the House decided that further measures were necessary even before there was any question of devaluation being considered.
This led the hon. Gentleman to suggest, while agreeing with the objective of reducing prices, that it was unfair to do it by margins on the retailers. He suggested that the retailers were being unfairly treated, and were in fact being picked upon. He did not produce any evidence that this is a harsh measure. I know a lot of figures have been bandied about in the national Press and at the jamboree of the National Chamber of Trade at Cardiff recently. He is in close touch with them, and I am surprised that he did not bring out those figures.

Mr. Boyd-Carpenter: I am in no more close touch with the National Chamber of Trade than I am with any other organisation which writes me a letter.

Mr. Wilson: I do not know whether the hon. Gentleman addresses mass meetings of every organisation which writes letters to him. [Interruption.] I am in somewhat close touch with the National Chamber of Trade, but not as close touch as hon. Members opposite, and I have not yet gone talking politics to them in the Caxton Hall. It can usually be found that if there are any people who imagine they have a grievance, some Tory M.P. will be there helping to fan the trouble, quite apart from whether the particular grievance is of such a kind that exploitation of it is contrary to the promises of his own party.
Referring to this Caxton Hall meeting, I was not there, of course—except in spirit—but I have been able to read a fairly full account of it in the "Manchester Guardian," and there is a subheading in that paper, "M.P. Fans the Glow." It says that the hon. Gentleman was unprejudiced, of course, but that everyone would agree that the basic cause of rising prices was the fantastic level of Government expenditure. It goes on a little about the question of timing, and says the hon. Gentleman "fanned the glow which was appearing in the hall." He quite rightly, and I am obliged to him for it, pointed out that the protest should be carried to the limit of the law. He did not suggest that anyone should go beyond the law. But he then used some rather inflammatory phrases, and the report goes on to say that at this stage the meeting proceeded to get out of hand. It does not use those words; that is my paraphrase.

Mr. Boyd-Carpenter: May I assure the right hon. Gentleman that the only moments the meeting showed signs of excitement was when the right hon. Gentleman's name was mentioned

Mr. Wilson: It was after the hon. Gentleman's appeal to them to carry the protest to the limit of the law, according to this report, that the meeting got completely out of hard—it must have been the eloquence of his oratory—and they passed a resolution calling on traders to go to the point of breaking the law and of calling a national strike against these orders. I know the hon. Gentleman did not propose anything of the kind, but it is clear that he got them worked up to such a state of excitement—

Mr. Boyd-Carpenter: The right hon. Gentleman is carrying what I thought a piece of pleasant badinage to a rather more serious point. May I assure him that not only did I use the words "within the law" with some emphasis, but that the amendment to the original resolution which did recommend carrying the matter outside the law was put, and I understand carried, some time after I had left the meeting? It is right to one who, whatever his views on the right hon. Gentleman, does insist on the law, that that should be on record.

Mr. Wilson: I am sure that if the hon. Gentleman had been there when such

an amendment had been moved, he would have used the full force of his oratory against it. I have already pointed out that the hon. Gentleman did in fact make that qualification about the limit to which these protests should be taken, but the fact still remains that someone at that meeting, and the "Manchester Guardian" seems to pay the full tribute to the hon. Gentleman, was fanning the glow and getting these shopkeepers to the point where they were passing more regrettable resolutions.
It is a fact that they seem to have forgotten all about the general strike since the order came into force, and I think the hon. Gentleman and I would welcome that fact. So far as I am aware, it is being loyally carried out, but I do not think that is any fault of the National Chamber of Trade and of that meeting which the hon. Gentleman addressed that evening. The hon. Member for Mid-Bedford (Mr. Lennox-Boyd) referred to my contacts with that body, but of course the National Chamber of Trade has been playing politics for a good many years, and the fact that its, so far as I can see, permanent chairman is Sir Walter Womersley, the former Tory member for Grimsby, might perhaps be one of the reasons.
The hon. Gentleman suggested that the effect of these orders has been unfair to the retail trade, and although he did not put it in the same extravagant words we get from leading members of the National Chamber of Trade, he rather suggested, as others have suggested, that our policy is based on some hostility towards the retail trade. We are always being told that the retail trade has suffered unduly over recent years by what this Government has done and that this is the last stage in a whole succession of crushing burdens we have put on them. As some suggest, though I know the hon. Gentleman did not suggest it, it is part of the policy to put them out of business and existence.
I should like to remind hon. Members that the facts simply do not bear out the suggestion that this Government has been treating retailers badly. They should recognise that the shortages are due to circumstances which the Tory Party would not remove, because in "The Right Road for Britain" they said they would not do so. Retailers have


been involved in more trouble and difficulty than in pre-war years, but there is no doubt that as a body retailers have prospered far more under this Government than ever they did even in the best pre-war years.
The retailers' prosperity depends on the purchasing power of their consumers and under this Government we have not seen the tragedy of hundreds of small shopkeepers closed down in the depressed areas. This can be proved by figures. Among every class of shopkeeper, with the exception well known to the House of pawnbrokers and back-street moneylenders, the number going bankrupt has been only a small proportion of what it was in even the most prosperous pre-war days.
I should like to give the figures of failures in the retail clothing distributive trades which the hon. Gentleman suggested I am "picking" on. In 1938 there were 241 bankruptcies and 238 deeds of arrangement in the clothing retail distributive trades—479 failures in one of the most prosperous years before the war. In 1948 there were 26 bankruptcies and three deeds of arrangement, giving a total of 29. So that in one of the most prosperous years under the administration of the party opposite there was something like 16 times as many failures in the retail clothing distributive trades as there were last year.
I do not see anything in the Government's treatment of retailers to suggest that anything we have done up to now has brought depression and harsh burdens on them. The hon. Gentleman has not brought forward any figures to suggest the effect of these orders on the retail trade. We have had fairly full discussions with the trade, and I think the trade would be the first to agree that we amended our tentative proposals in the light of our discussions. Therefore, not only can I call with confidence on the House to reject the hon. Gentleman's Motion, if he is going to press it to a Division, but I tell him that I cannot for the life of me see why he chose to raise it tonight.

11.20 p.m.

Mr. Lennox-Boyd: I think the Debate tonight has been well worth while, even though the hour is late and there is an Adjournment Motion

which may be of great importance to large numbers of people. The President of the Board of Trade took some credit for the fact that the number of bankruptcies among retail distributors had been conspicuously smaller than it used to be. I do not want to go into a long argument upon the reasons for that, but I think that in fairness it should be recognised that if it is true, as we have been repeatedly told by Cabinet Ministers, that some two million of our people are now employed because of American aid, then the retail shopkeepers have two million customers upon whom they can rely, who are paid for by American money.

Mr. Wilson: The hon. Member is trotting out this particularly hoary one. I think he will realise that the need for the loan, not only for this country but for others, was due to balance of payments difficulties. Will he explain why it was there were so many unemployed and so many bankruptcies when the country had no loan?

Mr. Lennox-Boyd: If it were in Order to develop that argument, I should be prepared to do so, but I take it that it would be out of Order. It seems to me, Mr. Deputy-Speaker, if the President of the Board of Trade makes a dogmatic statement of fact that there are so many fewer bankruptcies in the retail trade, and that this is due to wiser Government action, that it is surely fair and relevant to point out that his own colleagues, not excluding the Minister of Health, in a burst of candour, said that two million people would be out of work if it were not for the American loan.

Mr. Pritt: The hon. Gentleman has stated that several Cabinet Ministers have said in the House—

Mr. Lennox-Boyd: Never in the House.

Mr. Pritt: —that several Cabinet Ministers have stated that but for the loan there would be two million unemployed. One rather foolish non-Cabinet Minister having made that statement, I put down a Question to the Chancellor of the Exchequer in the House, and asked for an estimate. I extracted, after considerable difficulty and shuffling from the Economic Secretary to the Treasury, the assurance that there was no ground for any such statement.

Mr. Lennox-Boyd: That is most interesting. As to which are the most stupid Cabinet Ministers, I bow, to the knowledge, of the hon. and learned Member. It is true that someone who was once a Cabinet Minister, and who, indeed, was in the War Cabinet, namely, the right hon. Member for Wakefield (Mr. Arthur Greenwood), in a Hammersmith by-election, which took place in a constituency alongside that of the hon. and learned Member, said that there would be three million unemployed but for American aid. That is true. But the Lord President of the Council—and I hope I am in Order in reminding the House of these facts—said some months ago in Manchester that there would be two million unemployed; and the Minister of Health, in a statement never admitted by the right hon. Gentleman, was more modest and put the figure at 1,500,000. But I take it that we are none the less all agreed that but for the bountiful and shrewd generosity of the American Loan, we would have an unemployment problem. Having mentioned that, I will get back to these orders.

Mr. Wilson: Is it not clear, from the speech of the hon. Member for Chippenham (Mr. Eccles) tonight, that it would be the policy of the Tories to have both Marshall Aid and unemployment at the same time?

Mr. Lennox-Boyd: I listened to the speech of the hon. Member for Chippenham. He is entitled to speak as much as he likes for himself. [Interruption.] I suppose it must come as a surprise to a party which has such drastic discipline within its own ranks that occasionally people are entitled to make their own speeches, on our side of the House, in their own way. What I understood my hon. Friend the Member for Chippenham to say was that it would be better to have half a million unemployed this year than three million next year. That, to me, seems to be a sensible statement of fact, although under a good Government, there would be no need to have either alternative. As we are largely tied up with the American economy—and it is to the United States that the working population as well as the retail traders owe a great deal—we should not, I think, go into questions about what the bankruptcy figures would be if there were no American aid.
But it does seem to be a very good thing that we should discuss these orders briefly. There are a great many of them, and if they were discussed at enormous length, there would be no time for any other Parliamentary Business. Let us remember that the average citizen, of whom it is welcome to notice the Government are becoming increasingly conscious as the Election draws near, is more intimately affected by these statutory instruments than by anything: else. The ordinary citizen may not know—probably does not—that the rationing of his clothes, his food and his fuel is effected by statutory instrument very often; but our procedure allows us to discuss them only at this late hour.
My hon. Friend the Member for Kingston-upon-Thames moved a Prayer against three orders, and I hope that the House will not forget that only because of a chance remark by the President of the Board of Trade did we realise that one of these orders had been withdrawn. That, surely, shows the handicap under which the trading community, quite apart from the most diligent Members of this House, have to suffer. I try to read the two thousand odd statutory orders which come out every year—it is about that number—and it happens to be one of my particular responsibilties so to do; but I had not realised that Order No. 1600 had been withdrawn and replaced by Order No. 1920. If I cannot keep pace with all this, how can the traders? [Laughter.] I see nothing very funny in that. I happen to be an M.P.; the traders have to earn their own living—[Laughter]. Hon. Members opposite, who seem to think everything so funny, must surely realise that what I mean is that the traders have to look after a business as well as read and understand all these orders. Now, Mr. Deputy-Speaker, the amended order to which reference is made, No. 1920, and which, to be in Order I must link with Order No. 1600, because a Prayer is put down for the annulment of Order No. 1600.

Mr. Deputy-Speaker (Major Milner): No, I understand that the question of the first Motion does not arise. The order has been withdrawn, and cannot therefore be discussed.

Mr. Lennox-Boyd: Order No. 1600 has been withdrawn, and Order No. 1920 has been substituted; the explanatory notes


are understandable, but the rest of the Order is incomprehensible, and I hope will be subject to Parliamentary scrutiny later.
In general, I think it is agreed by all that the cost of living must come down; and that applies to the nationalised industries, to coal, transport, gas and electricity, and we welcome any efforts to reduce the cost of living. But our objection here is that the cost of living is being reduced through these orders by reducing the earnings of one section of the community alone. It is unpalatable to hon. Members opposite, but this is something which does play an important part in our national economy.
Our second objection to these price reductions is that they have been brought about without any proper consultation with the industry. Nothing has emerged from this Debate which has altered our view that the right hon. Gentleman could have carried the industry with him had he had proper consultations. In one and the same sentence he talked contemptuously about getting into a huddle with industry—as if that were not one of the duties of the President of the Board of Trade—and a moment later he talked of conferences with deputations which if they had happened before, might have prevented a great deal of misunderstanding.
I do not want to prolong the discussion tonight, but these are three orders out of many, and we shall have other opportunities to examine this principle in detail. These orders are now in operation and to revoke them would cause a good deal of confusion in retail distribution. We are sensible of our responsibilities in this matter. We know that there are other orders which we are watching carefully, and though we do not propose to divide the House tonight against the orders, we shall watch most carefully any future orders of the same kind.

Question put, and negatived.

NATIONAL ASSISTANCE (AGED PEOPLE)

Motion made, and Question proposed, "That this House do now adjourn."—[Mr. Popplewell.]

11.32 p.m.

Mr. Tom Brown: I make no apology for introducing the subject of the National Insurance Regulations at this late hour. I have been waiting patiently for a number of months, and had it not been for the long period of waiting I might have considered at this late hour postponing raising the matter. I feel convinced, however, that I must take this opportunity of raising it. At the outset I wish to state quite definitely that I am criticising neither the Minister of National Insurance nor the chairman of the Assistance Board. While I have some misgivings about certain actions of the Board, I am not going to criticise them.
The background of my battle for some alteration in the National Insurance Regulations began on March 15th, 1948, when I was disturbed at what was taking place on the administrative side of the National Assistance Board. Despite the fact that I attempted in every conceivable way to plead the case of those people who were in receipt of national assistance, the situation became worse. Fifty-four weeks later I approached the National Assistance Board with a deputation from the people who were affected and aggrieved at what was taking place. While it is true that on that occasion we did get some little alleviation of the sufferings and poverty of those people who unfortunately had to seek assistance from the Board, I remained, and still remain, dissatisfied with what was taking place.
On 5th July of this year, I put a Question to the Minister of National Insurance asking him to consider the advisability of reviewing the National Insurance Regulations, and their application to the old people of this country. Since that date we have had two Debates on the economic position of this country, which revealed difficulties confronting the nation in many aspects. I have always remembered that I was taught at school that difficulties are a means of progress if tackled in the proper way, and I am firmly of the opinion that something could be done to help the old folk of this country, if there was the will to do it.
I am not unmindful of the difficult times through which we are passing, but we cannot—I will go further, and say we must not—sit by and allow the veterans of industry and commerce, who are now feeling the full and severe economic blast which has blown upon us during the past two years, to suffer in this way, without doing something. A former Prime Minister of this nation, Lord Asquith, in 1908, when face to face with a similar set of circumstances to those with which we are faced today, gave expression to these words, which I want to impress upon the Parliamentary Secretary to the Ministry of National Insurance. This is what he said in this House:
But are we, because of the difficulties, and because of the complexity of the task, to sit still with dumb lips and bewildered brains and palsied energies, while this great procession of the poor and necessitous and unfriended linger out the last days of their lives of strenuous service given to industry and the State?
These are the words uttered in 1908, 41 years ago. In that year, there were approximately 1,750,000 people over the age of 65. Today, there are over 4,500,000 people over the age of 65, so that the need for further consideration to be given to the needs of these people is greater today than ever it was in the history of this country. Not only from my day-to-day experience of and contact with them, but from the many distressing letters that I have received, as have other hon. Gentlemen on this side of the House, from old age pensioners, I am convinced that many of the old folk, if not living in abject poverty, are living very austere lives and are forced by sheer economic circumstances to live such lives.
I see them every week in various parts of my constituency, which is well-known to this House as an industrial area, where great industries have been built up and have gone down, and are now being built up again, and where large numbers of people are suffering, as I have said, from the economic blizzard which has blown over this country. The thought of their suffering week by week, tears out my heart. I cannot rest until they get something like justice. They are suffering. Although I am aware of the perilous state of the country, we must make sure,

as Britishers, that the old folk do not suffer.
I am fully aware—no man more so, than myself—of the improvement that has been made by this Government in the direction of the increase in the basic rate, but I am not going to deal with that. It came into operation on 6th October. What is disturbing me is the rise in the prices of many commodities over the last 18 months, which has completely cancelled out the concessions made by the Government in an increase in the basic rate of pension from 10s. to 26s. for a single pensioner, and from 20s. to 42s. for a married couple.
Many items of food have increased by 8.2 per cent.; rents and rates have been increased; clothing has increased by 16.1 per cent.; household and durable goods by 8.8 per cent.; miscellaneous goods by 9.3 per cent.; services by 5.1 per cent.; drink and tobacco by 10 per cent. Roughly, therefore, the cost of living has increased by over 9 per cent. That was before the devaluation of the pound—and that fact alone warrants the consideration that I am asking should be given to the revision of the regulations which govern the supplementary pensions now being paid to those who have to seek them.
The rise in retail prices has been faster in the last few years than for a long time past. If we take the White Paper on National Income—Command Paper No. 7371—issued by the Treasury in connection with the Budget, it shows that the average prices in 1947 were 10 per cent. above the average prices in 1945 and that prices continued to rise, so that by December, 1948, the new Index of Retail Prices of the Ministry of Labour showed a rise of 9 per cent. above the prices of June, 1947. So there was a rise of about 20 per cent. above the 1945 prices.
I have been searching to find some impartial body—leaving on one side the Ministry of Labour's index figures—and I have turned my attention to the London Co-operative Society, which is not a political body by any means, but an impartial body. Figures given by the Society reveal that 30 articles of food have increased in price; 21 articles of clothing have increased; and that five main articles of furniture have also increased.
I then turned my attention to another well-known authority, but before I


quote from him, let me say that if we were to accept for a moment the Ministry of Labour's cost-of-living index, replaced by the Index of Retail Prices of 17th June, 1947, then these two indices showed a rise in retail prices which meant that between September, 1946, and January, 1949, the cost of living rose by 9 per cent. On the basis of these very unsatisfactory figures, it should be noted that, compared with September, 1946, the value of the spending power of the pound has fallen considerably and that makes it more difficult for the old people to buy the ordinary comodities they need to keep life and soul together.
I turn very hurriedly to quote from another impartial inquirer into these things, Mr. Donald Sears, who, writing in the "Oxford Bulletin of Statistics," said:
Some of the items are seriously over-weighted and others under-weighted.
According to his investigations, the over-weighted items are rent, meat, bacon, coal, soap and men's clothing. The under-weighted items, he says, are fish, vegetables, electricity, furs and entertainment. He makes one further point—that a number of items which affect the cost of living of working-class families have not been included at all. In a very long list that he gives, and which can be found in the "Oxford Bulletin of Statistics," he includes special bread, fish, dried eggs, invalid food, furnished lodgings. Even the Minister's index at present, when compared with the old index, does not give the prices of representative articles which change in price from month to month.
I beg of this House and of the Ministry of National Insurance, who to a large degree control these regulations, to bear these facts in mind. I should like to point out what the Chancellor of the Exchequer said about the future increases in prices. He said on 27th September, 1949:
There will undoubtedly, in the course of time, be some increase of prices, especially in articles made mainly of dollar raw materials.… We must, therefore, expect, as I have already said, some gradual increases in the prices over the next few months."—[OFFICIAL REPORT, 27th September, 1949; Vol. 468, c. 24.]
Speaking on 4th October, he gave this warning about increased costs:
There will, of course, be same decrease in consumption due to the fact that the cost of living will rise without, we hope, any rise

in personal incomes. That will be a burden which will fall almost entirely upon the wage-earner, and will be felt most heavily by those with the lowest incomes.
There is no section of the people in this country with lower incomes than the old folk who have to seek assistance from the Assistance Board.
I suggest to the Parliamentary Secretary that he should get this matter in its true perspective in relation to the increase which has taken place and which is bound to take place in the cost of living. There are three Departments concerned, in the main: the National Insurance Department, with their high-level officials; the National Assistance Department, with their high-level officials; and the Treasury, with their high-level officials. I suggest that these three Departments should get together with the will and determination to bring about some alteration in the National Assistance Regulations before the winter of 1949–50 becomes more severe upon these old people.

11.48 p.m.

Mrs. Braddock: I want to support the comments of my hon. Friend the Member for Ince (Mr. T. Brown), but perhaps in a different application. He has dealt with the increased cost of living, and I want to deal with the subject as it affects the aged persons who are admitted to hospitals or institutions throughout the country.
To my knowledge there have been two surveys, one of them made by Dr. Sheldon of Wolverhampton, on the admission of aged persons to hospitals and why they were admitted. The figures show that three per cent. of the aged persons were being admitted because of malnutrition. At my request there has been completed in Liverpool a report on the admissions of aged persons—over 50—to one of the hospitals in Liverpool. The period is 1948. Of the total admissions to hospital it was found that 3.7 per cent. were because of malnutrition alone. I have no reason to doubt those figures. In Liverpool I am a member of the aged persons sub-committee dealing with these peculiar problems.
If that is the position in an industrial area, I think the Ministry of National Insurance should request an immediate survey and report from other industrial areas of the incidence of malnutrition


among aged persons who are being admitted to hospital. I believe that the incidence of malnutrition has now been completely removed from the child life of the country, but has been replanted in the aged people who are going to hospitals. That is a very serious state of affairs, a state of affairs which this Government at any rate cannot allow to continue without taking some very definite notice and calling for reports of various sorts from various places.
On this matter local authorities now have the responsibility. The National Assistance Board pay supplementations, but the local authorities have the responsibility for the welfare of the aged. They provide any additional services which are required. We in Liverpool, on a survey taken of people living alone, or perhaps two together, find that the situation is so serious that we are compelled almost immediately to make provision for the supply of meals because these people are definitely going short of the actual necessities of life.
Like my hon. Friend, I am not pressing for any increase in the basic amount. I do not believe that there should be a general increase, but to all these people who have nothing but their old age pension, the 26s. is quite inadequate to supply the whole of the needs of aged persons living in their homes. Same very extensive supplementation of the 26s., apart from the rent, must be considered as soon as possible. We in local government are finding it necessary, under Act of Parliament, to provide hostels for aged persons, and the cost per week of these hostels is about three times what we pay to the aged person at home. If we are talking about economies, is it not much better to pay the aged persons the amount that will keep them in their own homes that to build hostels that will cost eventually between £4 10s. and £5 a week for each person? Small hostels of between 35 and 40 beds are not particularly economic units; they need the whole of the attention services, and they are pretty expensive.
Having regard to these two features, the incidence of sickness and malnutrition and the need for hostels, I hope the Parliamentary Secretary will think that some inquiry is necessary and also that increased supplementation is necessary.

11.53 p.m.

The Parliamentary Secretary to the Ministry of National Insurance (Mr. Steele): I am sure all of us agree that the hon. Member for Ince (Mr. T. Brown), over a long period of years, has taken a very great interest in the old people of this country, as many hon. Members have done on this side of the House. I am also sure that he has a great deal of satisfaction, as all my hon. Friends have, at the improvements which this Government have been able to make over the past four and a half years. In fact, from the legislation which we have been able to put on the Statute Book and actually to bring into operation, not only the old people, but many others who were suffering adversity have benefited greatly.
The other thing of which I should like to remind the House is that many Debates have taken place on the Assistance Board scales but most of them that I have read took place in an atmosphere much more heated than it is tonight. I am sure there has been a great change in the discussion of these regulations and scales. When I had the honour of moving the present regulations in June last year, there was a very thin House, no one spoke against them, and everyone warmly welcomed their introduction. They came in very smoothly, and the National Assistance Board have carried them into operation very well indeed. I should like to indicate what was the effect of these regulations when they were brought into operation, and I quote from the report of the National Assistance Board for 1948, which contains a wealth of information and shows the good work which the Board are doing. They say:
Of the recipients of outdoor relief 8.1 per cent. had gained sums of more than 10s. a week, 22.7 per cent. had gained between 5s. and 10s. a and 36.9 per cent. had gained sums between 6d. and 5s. a week. Of the recipients of blind domiciliary assistance, 17.4 per cent. had gained more than 10s. a week, 27.6 per cent. had gained between 5s. and 10s. a week, and 29.1 per cent. had gained sums between 6d. and 5s. a week.
I think we ought to get the position into proper perspective. The report shows that only a year ago when these regulations came into force, over the whole country, there was a substantial gain. These are the scales in operation. But another thing happened in regard to these regulations: there was added a


number of disregards which had not been in operation before. And there is something else which is a valuable power in the hands of the National Assistance Board officers, and something that cannot be put into regulations, rules or directions, and that is the discretionary power which the Board's officers have and do exercise.

Mr. William Ross: What is the percentage actually affected?

Mr. Steele: I have the figures here, and it is interesting to note that in November, 1948, out of 963,000 recipients of assistance, 265,000 were in receipt of discretionary or added allowances; for instance, additions were made for laundry, domestic help, special diet, extra fuel, and many other things which are not even classified. For 1948, they amounted to a total sum of roughly £3 million. I want to bring that out, because it indicates that the Board are using this valuable discretionary power to ensure that where there is special need and an extra allowance is necessary it is put into effect.
The hon. Member for Ince indicated that there was a great deal of distress and dissatisfaction about the scales, and went on to mention some of the things that have been happening; but I should like to say that even in the question of a discretionary grant there is a right of appeal by the applicant to have his case reconsidered by an independent tribunal. All I want to say about that is that in 1948 there were only 5,350 appeals against the decisions of the Assistant Board's officers. Of those only 1,220 had their rate increased. I think that indicates that the

Board's officers are carrying out the wishes of this House and reflects great credit on them.
All I can say on the question of scales—and I think hon. Members appreciate the position—is that under the National Assistance Act, as regards regulations dealing with the assessment of need, it would be for the Board to put forward to the Minister proposals for amending them if at any time they thought that in all the circumstances amendments were called for. I need say no more on this point—

Mr. T. Brown: Has that been done?

Mr. Steele: —except that we shall all study carefully the report of this Debate. I will convey to my right hon. Friend what hon. Members have said in the course of the Debate and ensure that the points which have been made are brought to his attention.

Mr. Swingler: Have they been put forward?

Mr. Steele: All I can say at the moment is that I shall convey to my right hon. Friend the wishes of hon. Members on this matter; further than that, I regret I cannot go. I am sure this Debate has been useful. It has drawn attention—

The Question having been proposed after Ten o'Clock and the Debate having continued for half an hour, Mr. DEPUTY-SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at Three Minutes past Twelve o'Clock.